Who is the creditor and who is the debtor and the difference between them with a detailed explanation –

Who is the creditor and who is the debtor and the difference between them with a detailed explanation –

Who is the creditor and who is the debtortwo terms that are widely used in various computational treatments, and there is no company or investment project that does not know these terms, usually debt is money, loaned by a person called the creditor or lender to another person who is called the debtor, and in our current era is giving the debt in order to recover it, and obtain On an interest rate as in banks, it is a deferred amount or a series of amounts that will be received in the future. We know in detail who is the creditor and who is the debtor in those lines.

Who is the creditor?

This name is applied to the person responsible for securing a specific amount of money for the other party, which is the debtor. The creditor may be only one or more persons, a company, or an institution. Likewise, the creditor is the person who owns the money or the company that owns the debt within the framework of the financial community. Mention the owners The jurisdiction is that the creditor means the party that provides funds, services, or goods from his own money and presents them to the debtor party, noting that an agreement is reached between the two parties on the method of repaying the debt, where the payment is of the same value as the amount or with the addition of financial interest.

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Who is the debtor?

As for the second party in the financial community, which is charged with the debt and is called the debtor, it may be a person or company that is also called the borrower if the creditor party is the bank. Debt is a bond, and the creditor and debtor are considered to be both parties to the financial account.

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The difference between a creditor and a debtor

The debtor and the creditor and the difference between them are among the basic and indispensable pillars of financial accounting, and it is difficult to find a financial accountant who does not know the difference between them so that no error occurs in recording daily entries and other transactions. We explain the difference between the creditor and the debtor in the following brief table

creditor debtor The face of comparison
The party owed the debt to the other party The party that owes the debt to another party, whether it is an individual or an institution the definition
Increased revenue makes it a creditor Increased expenses make her debit effect on the accounts
issued funds Incoming funds money type
Cash sale – accounts receivable Employee salaries – Wages – Purchase of buildings or land. Examples

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Different types of debt

Many companies depend in their dealings on debts of all kinds, and the debts of individuals and companies differ from the debts of governments, as there is no clear law that actually works to put an end to debts, just as there are no ready plans to manage crises resulting from government indebtedness, and in general, the different types of debts We mention them below:

  • Bad debts are debts that are difficult to collect, and there are several evidences for that, such as declaring the debtor bankrupt, leaving the country and the impossibility of reaching his address.
  • Doubtful debts, which are debts with a high probability of up to 80% of the debtor’s inability to pay them, and the biggest witness to this is the debtor’s irregularity in paying the debt in installments on time.
  • Good debts in this case are debts that are guaranteed to be repaid, as they are due from people with distinguished financial positions, so they are sure to be paid.
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How to get rid of accumulated debt

Many suffer in our current era from a large number of accumulated debts or going through financial problems as a result of borrowing from others and after a period of time they were unable to pay it on time, and the matter reaches complete incapacity and inability to pay it, and the matter gradually leads to losing the house or facing a lawsuit, Therefore, we explain the following how to get rid of the accumulated debt:

Credit card debt processing

  • By reducing its interest rate, expenses are reduced and money is saved monthly.
  • It is possible to start paying off high-interest cards, and resort to a debt consolidation loan, through which all credit cards are combined into only one card.
  • In the event that the previous methods fail, credit cards will be completely dispensed with
  • Going towards paying off the accumulated debts by organizing credit card payments in order to ensure the continuity of the credit card cash flow.

Money management

  • Where the funds are managed by preparing a budget for all sources of income.
  • Organizing all monthly expenses such as utilities, gas, electricity and others.
  • The income is also subtracted from the expenses. If the income exceeds the expenses, it can be said that the remaining amount is an estimated income that can be used to pay off debts.

Consider debt settlement

  • Going towards this procedure in the event that the debt is out of control.
  • The creditor may then have to accept any part of the debt instead of considering this debt as a bad debt.
  • Debts may be completely settled and canceled by some consultants.

Spread the news of bankruptcy

  • One of the undesirable options, as getting rid of debts, because it has a very negative impact on the debtor.
  • In return, he gets protection from the creditor, and a bankruptcy lawyer is sought before proceeding with this step
  • This is to obtain a black mark in the credit report for seven years.

Accounts receivable and accounts payable

The account is defined as the record or container that contains within it all the financial activities that affected it after analyzing the financial transaction. We mention an example in the event that the establishment sold goods worth $1,000 and got its value in cash. When analyzing the financial transaction, it contains accounts, which are a special account for sales It increased by $1,000 and the cash account (cash) increased by $1,000. We mention the following: debit accounts and credit accounts:

  • Assets, which are the resources that the institution owns and have value, whether they are lands – money – furniture – buildings – inventory and other different asset accounts.
  • Expenses are the costs that occur during the business process, such as wages, salaries, and many of the operating expenses of the facility.
  • Liabilities can be defined as the money owed by the establishment to another person or organization, such as: accounts payable, such as: wages owed.
  • Revenue is the money that flows into the business through sales.
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How the debit and credit affect the different accounts

decrease Increases the account
Creditor Debtor assets
Creditor Debtor expenses
Debtor Creditor liabilities
Debtor Creditor Revenues

What to do if the debtor does not return what is yours as a creditor

In the event that the debtor is late in paying what is your right of the debt and fails to pay it, there are judicial rulings that must be known and through which the rights are returned to their owners, and this requires providing evidence that the creditor lends the debtor the thing or the amount, as well as in the event that there is a contract that must This contract contains what was borrowed, the date of payment in detail, and the names of the two parties, that is, both the debtor and the creditor. The contract will not be approved if the full details are not provided.

Who is the creditor and who is the debtor? In this article, we got acquainted with the most important terms used in the science of financial accounting, with an explanation of the differences between them, and the solutions that can be resorted to in the event of debt accumulation.

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