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.
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