Different companies and business establishments follow several methods in promoting their products and services, aiming to increase their sales and thus increase profits. One of the most prominent of these marketing methods is the sale on credit or the sale on account, as well as the sale by installments.
This means that the company provides an advantage to its customers to pay for their purchases within a certain period of time, rather than immediately. The same may apply to companies that buy on credit or on account from suppliers.
However, if the company sells a product to one of its customers on credit or on account, an account must be opened in the name of the debtors or in the name of this debtor customer in the company’s financial and accounting books, so that this customer owes the value of the product sold to him.
In the event that your facility purchases materials from one of the suppliers on credit or on account, an account must be opened in the name of the creditors, and it is a creditor with the value of the materials purchased by your facility.
But, what is the definition of debtors and creditors? What are the correct arithmetic methods for each of them? This is what you will learn in this new field on the "Program Idea" educational blog.
What is the definition of debtors?
Debtors is a financial account that is opened in the accounting books of companies, business establishments, and various commercial activities. It arises when a company or organization sells a product or service to customers on the account, meaning that they will not pay the value of the product or service once, while the product value due is collected in full. or part of it during a certain agreed period of time.
Debtors is a financial account that is opened in the accounting books of companies, business establishments, and various commercial activities. It arises when a company or organization sells a product or service to customers on the account, meaning that they will not pay the value of the product or service once, while the product value due is collected in full. or part of it during a certain agreed period of time.
Debtors can be divided into two main categories as follows:
commercial debtors
Commercial debtors are receivables due from third parties as a result of deferred sale transactions (on account).
Commercial debtors are receivables due from third parties as a result of deferred sale transactions (on account).
Non-commercial debtors
As for non-commercial debtors, it means the receivables due from third parties as a result of operations other than the deferred sale or on the account and the provision of services, such as granting advances to employees, and receivables due from the state such as returned taxes and others.
As for non-commercial debtors, it means the receivables due from third parties as a result of operations other than the deferred sale or on the account and the provision of services, such as granting advances to employees, and receivables due from the state such as returned taxes and others.
What is the accounting treatment method for receivables?
The debtors account is always located on the assets side of the establishment's budget, and when your company carries out a deferred sale, at that time, as we indicated, an account is opened in the books in the name of the debtor who owes the value of the sold goods.
The debtors account is always located on the assets side of the establishment's budget, and when your company carries out a deferred sale, at that time, as we indicated, an account is opened in the books in the name of the debtor who owes the value of the sold goods.
When the debtor makes a payment, it is recorded on the credit side as follows:
First: Recording the sale of goods on the account
Second: Recording the debtor's payment of the amount owed by him or part thereof
What is the definition of creditors?
Creditors is an account that is registered or opened in the financial books of companies and institutions when they purchase certain products or obtain certain services by paying on the account, meaning that they agree to pay the value of the goods or services purchased in whole or in part during a certain period of time.
Creditors is an account that is registered or opened in the financial books of companies and institutions when they purchase certain products or obtain certain services by paying on the account, meaning that they agree to pay the value of the goods or services purchased in whole or in part during a certain period of time.
As such, creditors can be divided into two main branches:
commercial creditors
These are receivables due to third parties as a result of deferred purchases (on account).
These are receivables due to third parties as a result of deferred purchases (on account).
non-commercial creditors
They are receivables due to third parties as a result of operations other than deferred purchase and access to services, such as receivables due to the state in terms of taxes and others.
They are receivables due to third parties as a result of operations other than deferred purchase and access to services, such as receivables due to the state in terms of taxes and others.
What is the method of accounting treatment of accounts payable?
The creditors account is always recorded on the liabilities side of the budget under the liabilities item, and when companies buy on a deferred payment system from others, an account is opened in the name of the creditor from whom the facility purchased and is a creditor with the value of what the company purchased.
The creditors account is always recorded on the liabilities side of the budget under the liabilities item, and when companies buy on a deferred payment system from others, an account is opened in the name of the creditor from whom the facility purchased and is a creditor with the value of what the company purchased.
When the company makes a payment, it is recorded on the debit side as follows:
First: Recording the purchase of goods on the account
Second: Recording the payment of the due amount or part thereof
Debtor creditor statement
xxx
From H/ Creditors (creditor name)
xxx
From H/ Creditors (creditor name)
xxx h/ the fund or the bank
Pay the value of the goods in cash or check
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