Accounting




November 19, 2007

What is the distinction between debtor and creditor?

A debtor is a person or enterprise that owes money to another party. (The party to whom the money is owed is often a supplier or bank that will be referred to as the creditor.)

A creditor is a person, bank, or other enterprise that has lent money or extended credit to another party. (The party to whom the credit has been granted is often a customer that will now be referred to as a debtor.)

If Company X borrowed money from its bank, Company X is the debtor and the bank is the creditor. If Supplier A sold merchandise to Retailer B, then Supplier A is the creditor and Retailer B is the debtor.

You can find the definitions for 1,000 accounting terms in our accounting dictionary.






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Comments

6 Responses to “What is the distinction between debtor and creditor?”

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