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What are Sundry Debtors? Meaning and Examples
Updated on: Jun 9th, 2024
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5 min read
In the accounting and financial processes, the term 'sundry debtors' often sounds obscure, but it is a very important aspect of assessing a company's financial health. Sundry debtors or accounts receivable represent a key part of the business's assets, showing us the money that needs to be settled.
This article will help you get a clear picture of the meaning of sundry debtors, its examples and how it is recorded and treated in different accounts of financial statements.
What are Sundry Debtors?
Sundry debtors refer to businesses, individuals or companies receiving services or products from another company or business without making a payment immediately. The payment occurs on a credit basis, where the debtors are liable to pay the money in future. Sundry debtors promise to clear their dues, with additional interest applicable at times, in a specific period in future.
There are several reasons why management of sundry debtors is important within a business:
- It helps a company maintain a steady flow of cash and smoothly run business activities daily.
- Payment tracking becomes easy if sundry debtors are regularly accounted for.
- Bad debts could be easily identified, helping the business not suffer any losses.
Sundry Debtors is Which Type of Account?
Sundry debtors or accounts receivable are considered a fixed asset in the business. This is mainly because the money associated with sundry debtors belongs to the company. The money is lent to a business or individual and is expected to return in the business financials within a short period of time.
How to Record Sundry Debtors?
Companies generally use an account to track the transactions related to sundry debtors, known as 'Accounts Receivable Account' or 'Sundry Debtors Account'. You can record this account while preparing your financial statement or balance sheet, which is accounted under the Fixed Assets head.
Sundry Debtors Ledger Account Format
After completing the recording of your financial transactions using journal entries, you need to put the balances in general ledger accounts to get the closing value at the end of the financial year. In the case of sundry debtors' accounts, the format of the general ledger used to record and balance out the sum is given below:
Sundry Debtors A/C
| Dr. | Cr. | ||||
| Date | Particulars | Amount (Rs) | Date | Particulars | Amount (Rs) |
To Balance b/d (opening sundry debtors balance) | *** | By Cash Received from Debtors | *** | ||
| To Bills Receivable Dishonoured | *** | By Bills Receivable Received | *** | ||
| To Credit Sales (if provided) | *** | By Bad Debts | **** | ||
By Balance C/D (closing balance of sundry debtors) | *** | ||||
| ***** | ***** | ||||
Sundry Debtors Examples
Let us take you through an example to help you understand how sundry debtors are accounted for.
Imagine Mr. K, a business proprietor in the printing industry, who requires a supply of printing ink. To meet this need, he places an order with Mr. R, who operates a shop that sells printing supplies. As the transaction unfolds, Mr. K and Mr. R agree to a unique arrangement. Rather than making an immediate payment, Mr. K commits to settling the bill within 15 days from the date of purchase.
This commitment from Mr. K signifies the birth of a debtor-creditor relationship between him and Mr. R. In simple terms, Mr. K transitions from being a cash-paying customer, which would classify as a current asset for Mr. R's business, to becoming an active debtor. The collective term for such debtors is often referred to as 'sundry debtors'. In this way, businesses like Mr. R's manage their accounts receivable, keeping track of customers who owe them money under agreed-upon terms.
Sundry Debtors in Balance Sheet
In a balance sheet, sundry debtors are accounted for in the 'Assets' section, listed under the fixed assets head. This acts as an asset to the business, and in the books of the company, it is listed on the asset side of the balance sheet.
Sundry Debtors in Trial Balance
Sundry debtors are considered as the assets of a business. In such a scenario, the amount of sundry debtors is always debited while recording the general ledger balances in a trial balance.
Sundry Debtors Journal Entry
Trade or accounts receivable generally arise in a business due to credit sales, which are considered as business revenue. Nonetheless, when the amount is due to be received by the firm, it becomes the company's asset. Hence, the journal entry to record transactions related to sundry debtors is as follows:
Date | Particulars | L/F | Debit Amount (Rs) | Credit Amount (Rs) |
Sundry Debtors A/C Dr. To Sales A/C (Being goods sold to sundry debtors on credit) | ***** |
***** |
Difference Between Sundry Debtors and Sundry Creditors
Your understanding of sundry debtors will remain incomplete if you do not have an idea of how sundry debtors are different from sundry creditors. Below is a table showcasing the main points of differences between the two aspects:
Sundry Debtors | Sundry Creditors |
This refers to an individual or a business that owes money or debt towards an organisation. | This is understood as the parties or companies to whom the business owes the debt. |
They form as accounts receivable while preparing the financial statements. | They form as accounts payable when financial statements are prepared. |
Discounts, in this case, are only applicable to debtors. | Discounts are only received from creditors. |
Any sundry debtors fall under the ‘asset’ category. | Any sundry creditors fall under the category of ‘Liabilities’ in balance sheet. |
The word debtor is derived from ‘Debree’, a Latin word, meaning ‘to owe’. | The word creditor is derived from ‘Creditum’, a Latin word meaning ‘to loan’. |
Conclusion
Now you have a clear idea of what sundry debtors are and how it is accounted for in different financial statements. You must remember that recording transactions related to sundry debtors is highly crucial for the business as it allows the firm to track the money that needs to be settled. Discrepancies in this account can lead to errors in the financial statements, and an accurate understanding of the company's financial health will not be possible.
Frequently Asked Questions
Which are sundry debtors?
A sundry debtor is a person who purchases products or services from a company on credit or who defers payment and will eventually be responsible for paying the company. For instance, a customer who owes money to a form for the service or product given on credit.
Are sundry debtors a liability or expense?
Sundry debtors are neither a liability nor an expense for the business. It is considered as a fixed asset in the company.
What are sundry debtors on the balance sheet?
On a balance sheet, sundry debtors fall under the category of 'assets', specifically listed under the heading of 'fixed assets'.
Is sundry debtors a current asset?
No. Sundry debtors are fixed assets. This is because the money that is given on credit is expected to be returned, or in the case of products or services sold, the business expects money in return for that. So, it is considered as a fixed business asset.
How to adjust sundry debtors' amount to profit?
A corporation must use the accrual accounting system to adjust various debtors' amounts to profit. First, treat uncollectible loans as bad debt charges, reducing accounts receivable and, as a result, increasing expenses and lowering taxable revenue.
Estimate dubious debts using the allowance technique and allocate a part to bad debt expenditure. If, on the other hand, a debt is considered recoverable after it has been written off, restore it as accounts receivable and recover the bad debt charge.
Quick Summary
Sundry debtors are individuals or companies that owe money to a business for products or services purchased on credit, representing a key part of a business's assets. They are recorded in the accounts receivable account as fixed assets, and managing them helps with cash flow, identifying bad debts, and financial stability. Sundry debtors are different from sundry creditors and are crucial for a company's financial health.
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