The term ‘Debtor’ refers to a person or entity that owes money to your business for goods or services sold on credit. A group of such individuals or entities is called Sundry Debtors. They may also be referred to as accounts receivable or trade receivables.
Sundry means “various” or “several”. In the world of business, it refers to many similar items combined under one head.
Typically, sundry debtors arise from core business activities, such as sales of goods or services. The business treats them as an asset.
Example: Satya purchases some daily items from a grocery store on credit. Thus, Satya will be recorded as a Debtor in the store’s books (current asset). Similarly, a collection of such debtors is viewed as sundry debtors from the point of view of the grocery store.
Related Topic – Journal Entry for Sale of Services on Credit
Example & Treatment in the Balance Sheet
Suppose “Daniel Constructions” sold building material worth 60,000 to “Axis Housing” on credit and Axis Housing (buyer) agrees to pay the related invoices in the future accounting period.
In the above case, Axis Housing is a debtor for Daniel Constructions and the same is recorded in the books of Daniel Constructions (seller) for 60,000 due to credit sales. Many such debtors combined together are known as “Sundry Debtors”.
Sundry Debtors in Balance Sheet
In the books of Daniel ConstructionsNote: Creditors in the books of Axis Housing will also increase by 60,000 on account of credit purchase done for 60K construction material.
Related Topic – Sundry Expenses
Type of Account
When accounting for such receivables, it is vital to know what type of account is it because the accounting rule to be applied is based on it.
As per the golden rules of debit and credit
|Type of Account||Personal Account|
|Rule Applied||Debit the Receiver & Credit the Giver|
Similarly for the modern rules
|Type of Account||Asset account|
|Rule Applied||Debit the increase in assets and Credit the decrease|
Such trade receivables arise as a result of credit sales which is revenue in nature, however, when the money is due to be received it becomes an asset for the organization. Following is the journal entry for sundry debtors that should be recorded to show credit sale of goods/services;
In the Books of Seller
|Sundry Debtors A/C||Debit|
|To Sales A/C||Credit|
(Being goods or services sold on credit)
Rules – Debit the increase in assets (S. Debtors) & Credit the increase in revenue (Sales).
Entry at the time when payment is received
At the time when payment is received from the debtor below entry is recorded.
|Cash (or) Bank (or) B/R||Debit|
|To Sundry Debtors A/C||Credit|
(Payment made in cash (or) by cheque (or) issue of a bill receivable by the buyer)
Rules – Debit the increase in assets (Cash/Bank) & Credit the decrease in assets (S. Debtors).
Sundry Debtors in Trial Balance
Treatment of Sundry Debtors in the Trial Balance
Case 1: In case of no bad debts & no provision for bad/doubtful debts exist. It is simply shown as it is with a debit balance.
Case 2: When Sundry Debtors are recorded at the gross value in the trial balance, that is before making adjustments for bad debts and provision for bad/doubtful debts.
Case 3: When they are recorded at the net value in the trial balance, that is after making adjustments for bad debts and provision for bad & doubtful debts.
Net Sundry Debtors = Gross Sundry Debtors – Bad Debts – Provision for Bad & Doubtful Debts
The trial balance will appear to be similar to in case 1.
Note: Either the gross or net value of Debtors may be recorded in the Trial Balance.
Related Topic – Provision for doubtful debts in the trial balance
Sundry Debtors & Sundry Creditors
Example demonstrating the relationship between the two terms
Suppose a furniture-making company, Wood Ltd. sells furniture worth 30,000 to QRT Ltd. on credit. Therefore, QRT Ltd. will become a debtor for Wood Ltd. whereas, Wood Ltd. will become a creditor for QRT Ltd.
As a result, such transactions usually lead to the addition of a debtor & a creditor in the books of seller and buyer respectively.
Differences between Sundry Debtors & Sundry Creditors
- It refers to a group of people who owe money to an enterprise, but Sundry Creditors are those to whom the enterprise owes money.
- Unlike Debtors, who are assets, creditors are liabilities.
- As per the modern rules, an increase in Debtors (asset) is to be debited, whereas an increase in Creditors (liability) is to be credited.
- Similarly, credit a decrease in Debtors and debit a decrease in Creditors.
>Read Sundry Creditors