Debtors vs. Creditors

Main Difference

To maintain the supply-demand circle is the tiresome task for the companies with bearing the business risk at the same time. To get their business on track, the retailers need to have the wide range of products available all the times in their shelves. To fulfill the heavy demand, it often becomes difficult for the retailer as it involves a huge outlay of cash on the daily basis. In order to overcome the supply-demand issue, companies purchase the goods on credit and make sure their sales and the customers didn’t get affected due to lack of cash availability. The companies, retailers or the individuals who buy the goods on credit are known as the debtors. At the same time, the companies, retailers, or the individuals who provide the goods on credit to the debtors are known as the creditors. The credit facility is provided by the creditor with keeping in mind the market repute of the debtor; the debtor also incurs a certain amount of interest in this type of business relation.

Difference Between Debtors and Creditors

Comparison Chart

What are Debtors?

The debtors are the companies, individuals or the retailers who take goods or other services from the creditor on credit. The contract and official signing also take place between both of them, and it is also noted that when the debtor will be returning the amount. The debtor also incurs the interest rate; and in the case of non-payment within the time, the interest ratio gets higher. Those debtors who have good market repute and have a good record of returning the credit on time are appreciated and are being offered the best services possible. The business person or the firm turns out to be the debtor after they didn’t have a huge amount of money to run different operations, and to make sure the availability of all sorts of products. Debtors also deal the matter by the demand priority; following it the products or the goods which have higher sale or demand among the customer are bought on credit at first. The move is initiated so that the high sale demand goods get sale sooner and it makes the process of credit return quite convenient to them. The word ‘debtor’ is derived from a Latin word ‘debere,’ which means ‘to owe.’ If the debtor gets insolvent due to any of the untoward incident then the minimum amount from is taken and that too in different intervals of time.

What are Creditors?

The creditor is the solid firm, individual or the wholesaler who avails the product on credit to the debtors. It should be kept mentioned that the creditor possesses huge capital or holds the strong relation with the different multinational companies. With utilizing his money rightly, the creditor provides the wide array of goods to the debtor on credit. A certain interest rate is also imposed by the creditor which is directly affiliated with the time specified for the return of the credit. The creditor also offers the debtors which return the money within the rapid time the cash discounts. When the term and conditions are fixed between both the parties, the creditor in details tells about the cash discounts and payment schedules. The creditor sometimes provides the credit facility with just seeing the market repute of the firm, and in some cases, they make sure the asset of the debtors are pledged as the security.