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Creditors can be broadly divided into two categories: secured and unsecured. A secured creditor has a security or charge over some or all of the debtor's assets, to provide reassurance (thus to secure him) of ultimate repayment of the debt owed to him. This could be by way of, for example, a mortgage, where the property represents the security.
The words debit and credit can sometimes be confusing because they depend on the point of view from which a transaction is observed. In accounting terms, assets are recorded on the left side (debit) of asset accounts, because they are typically shown on the left side of the accounting equation (A=L+SE). Likewise, an increase in liabilities and ...
In accounting, the controlling account (also known as an adjustment or control account [1]) is an account in the general ledger for which a corresponding subsidiary ledger has been created. The subsidiary ledger allows for tracking transactions within the controlling account in more detail.
The accounting equation is a statement of equality between the debits and the credits. The rules of debit and credit depend on the nature of an account. For the purpose of the accounting equation approach, all the accounts are classified into the following five types: assets, capital, liabilities, revenues/incomes, or expenses/losses.
Conversely, a vostro account with a credit balance (i.e. a deposit) is a liability, and a vostro with a debit balance (a loan) is an asset. Thus in many banks a credit entry on an account ("CR") is regarded as negative movement, and a debit ("DR") is positive - the reverse of usual commercial accounting conventions.
Debt is an obligation that requires one party, the debtor, to pay money borrowed or otherwise withheld from another party, the creditor.Debt may be owed by a sovereign state or country, local government, company, or an individual.
The counterparty is called a creditor. When the counterpart of this debt arrangement is a bank, the debtor is more often referred to as a borrower. If X borrowed money from their bank, X is the debtor and the bank is the creditor. If X puts money in the bank, X is the creditor and the bank is the debtor. It is not a crime to fail to pay a debt.
Accounts receivable represents money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit terms [citation needed] or payment terms.