Creditor

From Encyclopedia Jr, free information reference for Kids

A creditor is a party (e.g. person, organization, company, or government) that claims that a second party owes the first party some properties or services. The first party, in general, has provided some property or service to the second party under the assumption (usually enforced by contract) that the second party will return an equivalent property or service. The first party is frequently called a lender, and the second party is frequently called a debtor or borrower.

In other words, your creditors are people to whom you owe money.

The term creditor is frequently used in the financial world, especially in reference to short term loans, long term bonds, and mortgages.

The term creditor derives from the notion of credit. In modern America, credit refers to a rating which indicates the ability of a borrower and likelihood to pay back his or her loan. In earlier times, credit also referred to reputation or trustworthiness.

[edit] Accounting classification

In accounting presentation, creditors are to be broken down into 'amounts falling due within one year' or 'amounts falling due after more than one year'.

The financial statements presentation is this:

• Long-term liabilities
  • 'Long-term creditors'
• Current liabilities
  • 'Current creditors'

[edit] See also

• Accounts payable
• IOU (I Owe You)
• Trade creditors
• Debenture loans
• Bank loan and Overdrafts
• Payments received on account
• bill of exchange payable
• Intra-group accounts owed
• Proposed dividends
• Accruals and deferred income