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Creditors

5 August, 2015 - 16:27

Creditors are people that you owe money to. So if Example Company Ltd bought a motor car on credit, the accounting entries would be as follows:

Journal - Page 1

Date

Description

Post Ref.

Dr

Cr

2006 Feb

1

Motor vehicle (Asset)

 

10,000

 
   

Creditors (Liability)

   

10,000

 

Later we make a payment

Journal - Page 1

Date

Description

Post Ref.

Dr

Cr

2006 Feb

1

Creditors (Liability)

 

100

 
   

Cash (Asset)

   

100

 

Whew! Those repayments are going to take some time...

As we saw when we discussed with debtors, when you receive a bank statement the bank shows you the position from the bank's point of view. When you are in credit, you have the asset and you are a creditor of the bank - the account is a liability account for the bank, as it owes you money , if and when you can withdraw all your money. When you are in debit, you are a debtor to the bank, and the bank is your creditor, and your account with the bank is an accounts receivable or asset to the bank.