Debtors (Assets) and Creditors (Liabilities)

• Assets

Real accounts and Personal accounts are capable of being called assets. Any element (account) that is capable of being liquidated (that is capable of being converted to cash by giving it away) indicates an asset. Machinery, Furniture, Cash, etc are real accounts that can be called assets.

» Debtors represent Assets

Debtors represent the persons and organisation who owe to the organisation. They would clear their dues by paying out either in cash or in some other form. Thus Debtors get liquidated and as such can be called assets.

• Liabilities

All elements representing liabilities are Personal accounts. An element that is capable of being cleared by paying out indicates a liability.

» Creditors represent Liabilities

Creditors represent the persons and organisation to whom the organisation owes. The organisation would clear its due by paying them either in cash or in some other form. Thus creditors are cleared by paying out and as such can be called liabilities.