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What is a debtor?

Definition: A debtor is a person or organization that owes money to another person or organization.
Debtors can be entities, companies or people of a legal nature that owe money to someone else – such as your business for example. If you or your business has one or more debtors then, in accounting terms, you a creditor.

Basically, the debtor-creditor relationship is similar to the customer-supplier relationship. You can be a customer and a supplier at the same time, just as you can be a debtor and a creditor at the same time.

Debtors in business

In general terms, a debtor is a customer that has purchased a good or service and in return owes their supplier a payment. This indicates that on a fundamental level, almost all companies and entities will be debtors at one time or another, since everyone makes purchases as a customer in some way or another. In accounting, this customer/supplier relationship is referred to as debtor/creditor.

A debtor may not be just a customer of goods and services, because someone who has borrowed money from a bank or a lender is also referred to as a debtor in accounting. One common example of this relationship is when you take out a loan to buy your house. In this scenario, you as the homeowner are a debtor, while the bank who holds your mortgage is considered the creditor. Ultimately, if you borrow money, you are a debtor to the loan agency you borrowed it from.

Typically, debtors have specific agreements with their creditors (suppliers/lenders) about payment terms, discounts, etc.

Your debtors in e-conomic

In the e-conomic Accounting Software, you can keep track of your debtors (customers) in your customer ledger card. In the customer ledger card, you can view all of the entries on each customer account for the current accounting periods.

Also, the aged debtor report in e-conomic provides a detailed account of which of your debtors owe you money, how much they owe, and when they should complete payment. You can learn more about the aged debtor report on our help site e-copedia.

 

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