14. Creditor:

14. Creditor:

     A creditor is a person to whom the business owes money. The business owes to him, because he has given some benefit to the business. A creditor constitutes a liability for the business.
     A creditor may be (a) trade creditor, (b) a loan creditor, (c) a creditor for an asset purchased on credit or (d) expense creditor.

     (a) Trade Creditor:
     A trade creditor is a person to whom the business owes money for goods purchased from him on credit.

     (b) Loan Creditor:
     A loan creditor is a person to whom the business owes money for the loan borrowed from him.

     (c) Creditor for Asset Purchased:
     A creditor for asset purchased is a creditor to whom the business owes money for any asset, say, furniture or machinery purchased from him on credit.

     (d) Expense Creditor:
     An expense creditor refers to a creditor to whom the business owes money for any service received from him on credit. In short, it means an unpaid or outstanding expense, e.g., unpaid salaries, unpaid rent, etc.

Differences between Debtors and Creditors:

     The important differences between Debtors and Creditors are:

     1. A debtor is a person who owes money to business. But a creditor is a person to whom the business owes money.

     2. A person becomes a debtor of a business, when he has received some benefit from the business. But a person becomes a creditor of a business, when he has given some benefit to the business.

     3. Debtors constitute assets for a business, whereas creditors constitute liabilities for a business.

     4. Accounts of debtors show debit balances. But accounts of creditors show credit balances.