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Debtor vs Creditor

Both debtor and creditor are the important entities in the business. Most business transactions are done between each other. Sometime debtor can also become the creditor. So, it is very necessary to know the differences between debtor and creditor for better identifying both identities.
Cartoon presentation


At here we are trying to explain main differences between debtor and creditor.

1. Definition 

Definition of Debtor 

Debtor is the person who has taken the goods on credit or money on debt. He has to pay his debt. To whom, he has to pay, will show him as debtor in his debtors' list. When a person take loan or goods on credit from many parties. He will be debtor of all these parties. If he will not pay his debt or money, his properties can be used for paying his debt as per court's order.

Definition of Creditor 

Creditor is the person who has given the goods on credit or money to other party in the form of debt. He has to take his money or debt with interest. In business, mostly, he will be supplier or vendor. If he sells goods on credit to many parties. All these parties will say him creditor. He has right to demand the money from debtors.

2. Example 

Example of Debtor 

a) Mr. A has bought goods from Mr. B of Rs. 1,00,000 on credit. Mr. A is the debtor of Mr. B.
b) Mr. B has taken debt from Mr. A of Rs. 1,00,000 at the rate of interest 1% per month. Here, Mr. B is the debtor of Mr. A.

Example of Creditor 

a) Mr. A has bought goods from Mr. B of Rs. 1,00,000 on credit. Mr. B is the creditor of Mr. A.
b)  Mr. B has taken debt from Mr. A of Rs. 1,00,000 at the rate of interest 1% per month. Here, Mr. A is the creditor of Mr. B.

3. In Balance Sheet 

Debtor in Balance Sheet

In the balance sheet of creditor, debtor will show as current asset because creditor has to take money from debtor. He can file the case against debtor if debtor will not pay his debt on the maturity. Creditor will have the proof about his goods sold on credit or given loan.

Creditor in Balance Sheet 

In the balance sheet of debtor, creditor will show as current liability because debtor has to give money to his creditor. So, it is the financial responsibility of debtor to pay creditor on the time. So, every financial responsibility will be shown in the liability side. When debtor will pay whole amount to his creditor, debtor will not show it balance sheet. 

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Accounting Education: Debtor vs Creditor
Debtor vs Creditor
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Accounting Education
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