{"id":24976,"date":"2015-12-02T08:46:27","date_gmt":"2015-12-02T08:46:27","guid":{"rendered":"https:\/\/www.clearbooks.co.uk\/?p=24976"},"modified":"2021-10-28T14:46:00","modified_gmt":"2021-10-28T13:46:00","slug":"what-is-a-creditor-and-what-is-debtor","status":"publish","type":"post","link":"https:\/\/www.clearbooks.co.uk\/blog\/what-is-a-creditor-and-what-is-debtor\/","title":{"rendered":"What is a creditor and what is debtor?"},"content":{"rendered":"<p>Our &#8216;commonly asked accountancy questions&#8217; blog series aims to help our audience understand tricky accounting terms or practices. This time, we&#8217;re focusing on what is a creditor and what is a debtor?<\/p>\n<h2>What is a creditor?<\/h2>\n<p>A <strong>creditor<\/strong> is a term used in accounting to describe an entity (can either be a person, organisation or a government body) that is owed money, as they have provided goods or services to another entity. Sometimes, this entity will charge interest on money borrowed as a way to make money. This could be interest on bank loan repayments or credit card payments.<\/p>\n<p>Examples of creditors:<\/p>\n<ul>\n<li>Trade creditors &#8211; money you owe to suppliers<\/li>\n<li>Loan from a bank or entity<\/li>\n<\/ul>\n<h2>What is a debtor?<\/h2>\n<p>A <strong>debtor<\/strong> is a term used in accounting to describe the opposite of a creditor \u2013 an individual that owes money, or who is in debt to an organisation or person. For example, a debtor is somebody who has taken out a loan at a bank for a new car.<\/p>\n<p>Examples of debtors:<\/p>\n<ul>\n<li>Trade debtors &#8211; money owed from customers<\/li>\n<li>Staff loans<\/li>\n<\/ul>\n<h2>Creditor and debtor scenario<\/h2>\n<p>One typical scenario of a creditor and debtor in everyday life, would be a credit card company <strong>(creditor)<\/strong> who has issued a credit card to a customer <strong>(debtor)<\/strong> once they have signed a legal contract. This will outline the interest the debtor will pay on the outstanding balance, and the spending limit that has been allocated to them (which is determined by personal circumstances).<\/p>\n<p>When that card user <strong>(debtor)<\/strong> spends money on that credit card, they are now essentially borrowing money from the credit card company <strong>(creditor)<\/strong>&nbsp;to pay for services or goods. For this scenario the credit card company charge 5% interest on each loan, meaning the debtor would pay 5% interest on the outstanding balance until it\u2019s cleared.<\/p>\n<p>For explanations of other commonly used accounting terms, check out our jargon-busting <a href=\"https:\/\/www.clearbooks.co.uk\/blog\/accounting-terms-glossary\/\" target=\"_blank\" rel=\"noopener noreferrer\">Accounting Terms Glossary<\/a>.<\/p>\n<p><strong>Clear Books is an award-winning online accounting software for small businesses. Thousands of business owners, contractors, freelancers and sole traders across the UK use our easy-to-use online accounting software to manage their business finances. All users benefit from the outstanding free telephone and email support. We\u2019re rated as \u2018Excellent\u2019 on Trustpilot.<\/strong><\/p>\n<p><a href=\"https:\/\/secure.clearbooks.co.uk\/account\/register\/home\/\"><strong>Get a free 30-day trial of Clear Books online accounting software here.<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Our &#8216;commonly asked accountancy questions&#8217; blog series aims to help our audience understand tricky accounting terms or practices. This time, we&#8217;re focusing on what is a creditor and what is a debtor? What is a creditor? A creditor is a [&hellip;]<\/p>\n","protected":false},"author":145,"featured_media":24129,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-24976","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is a creditor and what is a debtor? 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