Take our accounts payable test questions and answers to check out your knowledge of trade accounts payable used in double entry bookkeeping.
If as a business, you buy goods on credit from a supplier (creditor) then the supplier will supply the goods and business will incur a liability to the supplier for that amount, but no cash will change hands at that stage. Suppose for example, the business buys goods on credit for the amount of £4,000.
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.