How to account for trade creditors

Trade creditors is also referred to as accounts payable. It is the person or an organization who the business in question owe some amount of cash as a result of goods previously bought by the business in question on credit. In other words, Trade creditors are the suppliers the business owe money to.

When goods are bought on credit-the buyer, in this case the business in question creates for himself/herself/or itself a trade creditor. Hence;

 

DR Purchases a/c

CR Trade creditor a/c

 

When the business receives discount from its suppliers-ie discount received

DR Trade creditors   a/c

CR Discount received a/c

 

When the business pays for the goods it bought on credit by cash

DR Trade creditor a/c

CR Cashbook-cash column

 

When the business pays for the goods it bought on credit by check

DR Trade creditor a/c

CR Cashbook-bank column

 

When the business has a trade creditor whereby the trade creditor has also bought goods on credit from the business in question-ie contra entry settlement

DR Trade debtor-B a/c

CR Trade creditor-B a/c

 

When the check paid by the business to the trade creditor is dishonored by the bank

Dr Bank a/c

Cr Trade creditor a/c

 

When the business accepts a bill of exchange

DR Trade creditor a/c

CR Bills of exchange payable a/c

 

When the trade creditor refunds cash to the business

DR Cashbook

CR Trade creditor a/c

 

When business returns goods to the supplier

DR Trade creditor a/c

CR Returns outwards a/c