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Creditors Account

A creditor is a person or firm to which we owe money for goods, services or work done. A trade creditor is a supplier who grants us credit that allows a grace period for us to settle the bills after we have taken delivery of the raw materials, components, finished goods or services. A creditor is our liability, and creditors are shown on year-end financial statements.

An account is opened for a creditor who has not already had an account in our books. We credit the accounts of the creditors each time they supply goods to us. It’s important that we credit the right accounts, especially when we have a large number of creditors. Whenever we make payments to them, we debit their accounts. At the end of each period which is usually a month, most of the creditors’ accounts will have a higher credit total than a debit total as it is most unlikely that we will have made full payments to all of them. There are however some accounts which are likely to show equal totals for both debit and credit sides. This means we no longer owe them anything and they are no longer our creditors.

Balancing the account is about finding out the difference between the debit and credit sides of an account, and entering the difference on the lesser side so that the debit and credit sides are equal in totals. Like the debtors accounts, the creditors accounts are balanced for closing at the end of each period or month so that a new account can be opened for the following month. The following steps are taken to balance and close the accounts.

  1. Add up both totals for the debit side and the credit side.
  2. Deduct the small total from the big total. The difference is the balance.
  3. Put in the balance on the side with the small total so that both totals are now equal. Enter the date for this balance which is the last day of the month. This balance is known as ‘carried down (c/d) balance’ and is written as ‘Balance c/d.’
  4. Write down the totals for each side on the same line.
  5. Copy the balance on the line below the totals but on the opposite side, and enter the date which is the first day of the following month. The balance here is known as ‘brought down (b/d) balance’ and is written as ‘Balance b/d.’

A creditor’s account

Items that appear in a creditor’s account

Delilah Samson & Co. Account

Date Particulars Folio Amount
Date Particulars Folio Amount

$ $
Cheques paid
XXX Balance b/d XXX
Cash paid
XXX Purchases XXX
Returns outwards XXX XXX
Discounts received
Balance c/d XXX


Last Updated (Friday, 03 September 2010 12:56)