3. Credit Transactions Flashcards
Define Creditor.
A creditor is a party (normally an individual, another business or a financial institution) to whom a business owns money.
What is a trade creditor?
What are trade payables?
A trade creditor is a party to whom a business owes money for trading debts.
In the accounts of a business, debts still outstanding which arise from the purchase from suppliers of materials, components or goods for resale are called trade payables.
A business does not always pay immediately for goods or services it buys. It is common business practice to make credit purchases, with a promise to pay within 30/60/90 days of the date of the bill or ‘invoice’ for the goods.
Define Trade Payables?
How do they appear in the financial statements of a business?
Trade payables are the amounts due to credit suppliers.
A trade payable is a liability of a business. When the debt is finally paid, the trade payable ‘disappears’ as a liability and the balance of cash at bank and in-hand decreases.
Define a debtor.
A debtor is a party who owes money to the business.
What is a trade debtor?
What is a trade receivable?
A trade debtor is a party from whom a business is owed money for trading debts.
In the accounts of a business, amounts owed by debtors are called trade receivables.
Define trade receivables.
How do trade receivables appear in the financial statements?
Trade receivables are the amounts owed by credit customers.
A trade receivable is an asset of a business. When the debt is finally paid, the receivable ‘disappears’ as an asset, to be replaced by ‘cash at bank and in hand’.
What is the accruals concept?
The accruals (or matching) concept requires that income earned is matched with the expenses incurred in earning it.
