Creditors and debtors
Equations are omitted for technical reasons - download the original pdf
Creditors are the people to whom we owe money for goods and services supplied by them to us on credit. Debtors are the people who owe us money for goods or services we have supplied to them. They are our debtors. It is quite easy to mix up the terms, and get them the wrong way around, especially as they are "relative" terms - for example, I am a debtor to my creditors! To learn these terms - start with credit. You buy on credit, therefore you are a creditor, and the credit purchases that you have yet to pay is part of your liabilities. Individuals and companies that owe you payment are in debt to you, and are your debtors, and consequently constitute part of your assets.
1 The Balance Sheet: What does the company own?
2 Current Assets and Liabilities
3 Creditors and debtors
4 Capital and Reserves
5 The balance sheet
6 Types of share
7 Ordinary shares
8 Preference shares
10 Above the line and below the line in a balance sheet
11 Share premium
12 Analysis of Assets and Liabilities
13 Provision for bad debts
14 Subdivisions of current liabilities
15 What is meant by capital?
16 What is the difference between capital and money?
17 What is meant by a liability?
18 What is meant by an asset?
19 Are all the assets employed in a company generally owned by the owners of the company?
22 Current asset
23 Current liability
25 Cash flow crisis
28 Net current assets
29 Long-term liabilities
30 Net assets
32 What is limited liability? How does limited liability protect entrepreneurs and investors from
33 What is meant by the term reserves?
34 Why do we distinguish between loans and bank loans?
35 Why are loans from directors generally more important to small companies than to large companies?
36 Make two lists showing (1) the similarities between ordinary and preference shares; and (2) the diff
37 Why are debentures regarded as long-term liabilities, and not as capital?
38 Why would you be prepared to pay more than £1 for a share with a nominal value of £1?
39 Why do companies that are quoted on the stock exchange need a minimum share issue?
40 How do companies distribute profits?
41 Using examples, explain the difference between fixed assets and current assets.
42 In what sense can fixed assets be regarded as being used up in the production cycle?
43 Are creditors assets or liabilities? Are debtors assets or liabilities?
44 What are bad debts? How can bad debts cause a company to have a cash flow crisis?
45 Under what circumstances is it a problem for a company to run its production cycle on an overdraft
46 Where does a dividend that has been paid appear in the Balance Sheet? Where does a dividend tha
47 Accounting Exercise : East West Tools Company Limited
48 Accounting Exercise 3: The Bright Sheet Company Limited