Free Guide to
Bookkeeping Concepts

Accounting Bookkeeping Concepts PDF Cover

Receive our free 18-page Guide to Bookkeeping Concepts (PDF) when you subscribe to our free newsletter.

You are already subscribed. This offer is not available to existing subscribers.
Step 2: Please check your email and click the confirmation link.


What is a creditor?

A creditor may be a bank, supplier or person that has provided credit to a company. In other words, a company owes money to its creditors. The amounts owed to creditors are reported on the company's balance sheet as liabilities.

If a creditor required the company to sign a promissory note for the amount owed, the company will record and report the amount as Notes Payable. If a creditor is a vendor or supplier that did not require the company to sign a promissory note, the company will likely report the amounts owed as Accounts Payable. Other examples of creditors include company's employees (who are owed wages and bonuses), governments (who are owed taxes), and customers (who made deposits or other prepayments).

Some creditors are known as secured creditors because they have a lien or other legal claim to the company's (debtor's) assets. Other creditors are often unsecured creditors since they do not have a lien or legal right to specific assets of the company.

Most balance sheets report the amounts owed to creditors in two groupings: current liabilities and non-current (or long-term) liabilities.