SUNDRY DEBTORS: DEFINITION AND DIFFERENCE BETWEEN CREDITOR AND CUSTOMER - DUDAS - 2025

The sundry debtors account includes the accounting items of individuals or entities that owe money for reasons unrelated to the normal business of the company. In accounting, the balance sheet is used as if it were a photograph, a reliable and real reflection of the economic situation of a company.

This report details the assets, liabilities, and equity of a company at a specific time. Within this balance sheet there are different accounts and one of these is that of various debtors, which is part of the current assets of a company.

This current asset is the assets, economic goods and rights to collect of the company that are pending to be used in less than a year among the various debtors. An example of this is employee loans that mature in months.

The balance sheet is the starting point to analyze the financial soundness of a company. Unlike other reports - such as the income statement, which details the profits and expenses of a company over a period - the balance sheet lists all the assets and liabilities of a company at the current time, and does so through your accounts.

Definition

Sundry debtors is a collective account within the balance sheet that groups together the total of credits in charge of several people who do not have the customer classification.

Examples of these accounts of various debtors can be cash loans to employees or third parties, sale of fixed assets already depreciated, or another item that is not merchandise, among others.

The importance of this accounting account focuses on the fact that, although they are small loans to various individuals or companies, they are loans that mature and can be claimed within the accounting year.

Active or passive?

As mentioned in the previous point, diverse debtors is an accounting account that includes different individuals or companies that, without having the customer classification, have an economic debt with the company.

What is the nature of this sundry debtor account: is it part of the asset or liability? Let's define both concepts to be clearer.

Assets are items that the company owns and uses to conduct business. Instead, the liability is what the company owes to others. Shareholders' equity is essentially the difference, comparable to a company's equity.

The main difference between asset and liability accounts is that assets provide a future economic benefit, while liabilities present a future obligation. Therefore, an indicator of a successful business is one that has a high asset-to-liability ratio.

The debts that companies or individuals have with the company that do not come from the usual marketing of the same, suppose a future economic benefit; that is, they are part of the company's assets.

Assets are the resources available to the company to carry out its operations, which represents all the assets and rights that are owned by the business.

The diverse debtors suppose debts to be collected by the company and, therefore, payment rights that result in resources of the same; that is, assets.

The difference between assets and liabilities is known as equity, net assets, equity or capital of the company, and according to the accounting equation, the equity must be equal to the assets minus the liabilities.

Difference between debtor, creditor and customer

Although these terms are seemingly simple, they can often be confused. Especially the term debtor and creditor may not be so clear in its distinction, especially for small businesses.

What is a debtor?

A debtor is a party who owes money to another. As simple as that. It can be from an individual - that is, an individual - to a small company, or even a government or official body. It differs from the client in that its debt does not come from the company's usual trade.

Usually the debtor has an obligation to pay back the money owed in a defined period, often with additional interest payments as an incentive to lend money.

In a small company, you can have debtors and also be a debtor to others.

What is a creditor?

The creditor represents the opposite side of this transaction: it is the party that has provided money, a service or a good to an individual or company.

Banks and other financial institutions account for a large part of the creditors operating in today's economy, although market developments have created other options, such as individual loans to companies.

What is a customer?

A customer is one of the parties to a commercial transaction that receives or consumes products (goods or services) and has the ability to choose between different products and suppliers.

Then, customers who have purchased products or services that have not yet paid are debtors of the company that sells, which acts as a creditor in this case. In the same way, the company that sells is in debt to its suppliers if they have provided raw material that it still has to pay in full.

The relationship between the terms creditor and debtor is important, especially in the case of small businesses, as they affect the assets and liabilities on your balance sheet.

Being a creditor of another company can be considered an asset, demonstrating the financial strength of the company in question, while excessive debt is considered a risk.

Why is it called a balance sheet?

The three elements of the balance sheet - assets, liabilities and equity - are those that provide investors with a more precise and detailed idea of ​​what the company owns and what it owes, as well as what is invested by shareholders.

It is called the balance sheet because, after all, it is the two sides of the balance (assets on the one hand and liabilities plus shareholders' capital on the other) that must balance.

The motivation behind the balance sheet equivalence is not technical, it is simple: on the asset side I detail "what I have", and on the liability side I detail "who does it belong to."

References

1. Accounting Coach. What is the meaning of sundry and sundry debtors ?. accountingcoach.com
2. Business dictionary. Definition sundry debtors. Businessdictionary.com
3. Legal Information Institute. Debtor and creditor. law.cornell.edu
4. Investopedia. Breaking Down Balance Sheet. investopedia.com
5. Accounts and Legal. Small business advice, debtors and creditor explained. 23.02.20017. accountsandlegal.co.uk