Introduction to Debtors
Debtors in accounting are amounts which are owed to a business by customers, they are sometimes referred to as accounts receivable.
When a business allows a customer credit terms and invoices them for a product or service and receives payment at a later date 30 days 60 days etc, then while the customer owes the business the amount outstanding they are classified as a debtor in the bookkeeping records.
Debtors are recorded in the balance sheet of the business under the heading of current assets which means they are convertible into cash within a year.
How do you Record Debtors?
Normally a debtor is first recorded in the sales ledger which contains a personal account for each customer. In this way a listing of the sales ledger accounts will give the business an outstanding debtors aged analysis.
If for example, sales are made on credit terms to Customer A for 200 and Customer B for 400 the first entry would be to the sales day book to record the sales.
The next entry would be to the sales ledger to record the debtor to the personal account of each customer.
Finally the double entry posting would be the total from the sales day book and the sales ledger.
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About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.