Definition Of Sundry Debtors:-
‘Debtors’ is a person or an organization who owes money to another person or organization.
‘Debtors’ can be an entity, person or government body that owes money to another person (Entity, Person or Government Body). In this situation all are their ‘Creditor’. This is customer Supplier relationship.
Debtors In Business:-
In terms of business, if you sell your products to anyone, the buyer could be an entity, a person or a government body. In this situation, you are the supplier and the person who bought your products, he is your customer. This Customer-Supplier relationships we called ‘Debtors-Creditors’ relationship. The Supplier= The Creditor and The Customer=The Debtor.
You also could be a Debtor, when you buy something. In this case, you are the customer and your supplier is your Creditor.
Debtors In Banking:-
In Banking, when you get a loan from Bank, the Bank is your Creditor and you are the Debtor. In this situation you owe a loan from a bank.
Differences Between Sundry Debtors And Sundry Creditors:-
Discount Allowed On Debtors:-
It is the cash discount allowed to Debtors for prompt payment of dues. It causes a loss of revenue in charge against revenue like any operating expenses.
Provision On Discount On Debtors:-
Usually Debtors are allowed cash discounts for early prompt payments. Provisions are created annually against such an anticipated cash discount. The provision for cash discounts is related to the debtors of the current period. The management guesses the trend of collection of dues mainly based on its knowledge about the debtors and its previous experience. The provision is charged against the current year’s profits. It is deducted from Sundry Debtors appearing on the Assets side of the currents year’s Balance Sheet. However, the Provision for Discount is calculated after deducted further Bad Debts and Provision for Bad and Doubtful Debts. The reason is obvious. A Debtor from whom debts have become or are expected to become bad, cannot at the same time be expected to make prompt payment.
The guesswork regarding the quantum of Provision for Discount on Debtors becomes somewhat difficult. Because under inflationary situations, deferred payments lead to a lower amount of real cash outflows. This may cause a customer to refrain from the line of cash discounts.
