Lesson 54: Payables (Creditors) / Credit Purchases, Returns and Payments
When an asset, like stock or equipment is bought on account (on credit) from another business, the buyer is allowed to take the asset now and pay for it at a later stage. Because the buyer has not yet paid for the item, they are obligated to pay at some date in the future. It’s as if the credit purchase is made by the business with an “invisible credit card”. This system of B2B (business to business) credit can also be used for expenses.
From the buyer’s point of view, the seller is known as an accounts payable (creditor). In the accounts of our business, creditors represent liabilities (obligations) and they are a source of funds that has to be settled at some time in the future.
The creditors have an indirect claim on the assets.
The word creditor can refer to the actual person who supplied the goods or to the legal obligation in our books.
Also refer back to Lesson 47: Credit Transactions.
From the buyer’s point of view, the seller is known as an accounts payable (creditor). In the accounts of our business, creditors represent liabilities (obligations) and they are a source of funds that has to be settled at some time in the future.
The creditors have an indirect claim on the assets.
The word creditor can refer to the actual person who supplied the goods or to the legal obligation in our books.
Also refer back to Lesson 47: Credit Transactions.