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What is the distinction between debtor and creditor?

Author:
Harold Averkamp, CPA, MBA

Definition of Debtor

A debtor is a person or enterprise that owes money to another party. The party to whom the money is owed might be a supplier, bank, or other lender who is referred to as the creditor.

Definition of Creditor

A creditor is a person, bank, or other enterprise that has lent money or extended credit to another party. The party to whom the credit has been granted is the debtor.

Examples of a Debtor and a Creditor

Assume that a company borrows money from its bank. The company is the debtor and the bank is the creditor. If a manufacturer sells merchandise to a retailer with terms of net 30 days, the manufacturer is the creditor and retailer is the debtor.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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