The financial statements of a business consists of several financial transactions which are recorded. Two such important financial transactions for any business are Sundry Creditors and Sundry Debtors.
Sundry Creditors
What are Sundry Creditors?
The word ‘Sundry’ refers to ‘several’ or ‘many’. In the business world, Sundry refers to several similar items grouped under a single head.
- Creditors refer to businesses or individuals to whom another business owes money for goods or services purchased on credit.
- A group of these individuals or business entities are together called Sundry Creditors.
- In a company, Sundry Creditors are a liability since the company owes a certain amount to another business for the goods or services taken by them on credit.
- Sundry Creditors are also referred to as Accounts Payable or Trades Payable.
Examples
- Samsung purchases 1000 laptops from Nokia on credit. In this case, Nokia will be shown as a creditor (existing liability) in the books of accounts of Samsung. A collection of many such creditors will be known as Sundry Creditors from the point of view of Samsung.
- Suppose ‘Shlok Fruits Pvt. Ltd.’ sold fruits worth Rs. 50,000 to ‘Anju Fruits’ on credit. The seller ‘Shlok Fruits Pvt. Ltd.’ agrees to accept a delayed payment in the future accounting period for the generated invoice. This transaction which took place on 25th January 2024 requires ‘Anju Fruits’ to settle the invoice by 25th March 2024. Maintaining a timely payment record is vital for ‘Anju Fruits’ as it plays a key role in maintaining favorable credit history. To account for this obligation, ‘Anju Fruits’ will accurately record this transaction in their financial records under the ‘Sundry Creditors’ ledger and categorize it as a liability for the business.
In the books of ‘Anju Fruits’
Balance Sheet as on . . . | |||
Liabilities | Amount | Assets | Amount |
Capital & Reserves | Current Assets | ||
Less – Drawings | Sundry Debtors | ||
Reserve and Surplus | Cash in Hand | ||
Fixed Assets | |||
Current Liabilities | Machine | ||
Sundry Creditors | 50,000 | Furniture | |
Bank OD | |||
Investments |
Type of Account
- Sundry Creditors are also known as Accounts Payable and are placed under Liability Account of a business.
- This is because businesses supply goods or services in advance to another business or individual and the payment is received later.
- Since the purchaser tends to pay the money to the seller later, Sundry Creditors become the liability of the business.
- They are recorded under the heads ‘Liabilities’ of the balance sheet.
Journal Entry
Accounts (Trade) Payable arises due to purchases being made on credit. When this money is due, it becomes a liability for the entity.
The following is the journal entry for Sundry Creditors that needs to be recorded to show goods or services being purchased on credit.
In The Books of The Buyer
(Goods or services being purchased on Credit)
Purchase A/C | Debit |
To Sundry Creditors A/C | Credit |
When the payment is made to the Creditor in cash, cheque, or electronic transfer, the following entry is passed.
Sundry Creditors A/C | Debit |
To Cash or Bank payment | Credit |
Sundry Debtors
What are Sundry Debtors?
Sundry Debtors are customers (individuals) or entities who owe money to a business for goods or services purchased on credit.
- Generally, Sundry Debtors arise from core business functions such as the sale of products or services.
- The business that is providing the goods or services on credit treats Sundry Debtors as an asset.
- The customers or entities that owe money to your business are collectively called Sundry Debtors.
- Unlike cash transactions, where the payment is made immediately on purchase, Sundry Debtors choose for certain credit terms and make a commitment to settle the bill in the future.
- Sundry Debtors are also referred to as Accounts Receivable or Trade Debtors.
Example
Suppose ‘Shlok Machines’ sold equipment worth Rs. 1,00,000 to ‘Suresh Tools’ on Credit. The buyer (Suresh Tools) agrees to clear the invoice in the future accounting period.
In this case, Suresh Tools is the debtor for Shlok Machines and the same is recorded in books of accounts of the seller (Shlok Machines) for Rs. 1,00,00 due to credit sales. Several such debtors are known as Sundry Debtors.
In the books of ‘Shlok Machines’
Balance Sheet as on . . . | |||
Liabilities | Amount | Assets | Amount |
Capital & Reserves | Current Assets | ||
Less – Drawings | Sundry Debtors | 1,00,000 | |
Reserve and Surplus | Cash in Hand | ||
Fixed Assets | |||
Current Liabilities | Machine | ||
Sundry Creditors | Furniture | ||
Bank OD | |||
Investments |
Type of Account
- Sundry Debtors are also known as Accounts Receivable and are usually placed under the Current Assets section of the balance sheet of a business.
- Accounts Receivable are recorded in the non-current assets if the amount is due for more than a year from the date of sale.
Also Read: How Do Business Owners Handle Accounts Receivables?
Journal Entry
- Accounts (Trade) Receivables arise due to sales on credit which is revenue generating.
- It is classified as an asset as money is due to be received by the organization.
The following is the journal entry for Sundry Debtors that needs to be recorded to show the credit sale of goods or services.
In The Books of The Seller
(Goods or services being sold on Credit)
Sundry Debtors A/C | Debit |
To Sales A/C | Credit |
When the payment is received from the buyer, the following entry is passed.
To Cash Or Bank Payment | Debit |
To Sundry Debtors A/C | Credit |
For businesses to maintain complete transparency in their account, understanding important terminologies such as Sundry Creditors and Sundry Debtors is crucial. For seamless cash flow in their business, to boost profitability, improve bottom line and to avoid defaults and penalties, entities need to manage Sundry Creditors and Sundry Debtors effectively.
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