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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

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

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  10. Asim on November 14th, 2008 3:36 pm

    Thanks for your comments but unfortunately I can’t understand logically I mean by General Entry.

    Can you please define me in 2 entries in debit & credit side of xyz company
    where mentioned debtors and creditors

    1. If company is own money to any company what entry made?

    2. if payable of xyz company against taken some services not cash that what entry made.

    please differentciate?

    Thanks

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  13. Nazmul Khair on June 22nd, 2009 9:37 pm

    Thanks for Nice answer. Really good. I am clear about debtor and creditors. But it will be more clear that if here write about payment condition. I mean in payement mood which us debtor and which is creditor. Ok dont dont worry i can understand it. Thanks buddy.

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