Introduction to Creditors
Creditors are amounts which are owed by you to your suppliers, they are sometimes referred to as Accounts Payable or Trade Creditors.
If your supplier allows you credit and invoices you for a product or service and you make payment at a later date 30 days 60 days etc, then while you owe the supplier the money they are classified as a creditor of your business.
Creditors are recorded in the balance sheet of the business under the heading Current Liabilities, that means they are payable within a year.
How do you record Creditors?
Creditors are normally first recorded in the Purchase Ledger which contains a personal account for each supplier. In this way a listing of the purchase ledger accounts will give you a listing of outstanding debts or Creditors.
If for example, purchases are made on credit from Supplier A for £200 and Supplier B for £400 the first entry would be to the purchases day book to record the purchases.
|Purchases Day Book||Page 1|
|8th May 2013||Supplier A||Invoice 123||Page 4||200|
|9th May 2013||Supplier B||Invoice 456||Page 7||400|
The next entry would be to the Purchase Ledger to record the Creditors to the personal accounts of each Supplier.
|Supplier A||Page 4|
|8th May 2013||Purchases||PDB 1||200|
|Supplier B||Page 7|
|9th May 2013||Purchases||PDB 1||400|
Finally the double entry posting would be the total from the purchases day book and the purchase ledger.
|Creditors Control Account||600|