What is a Debtor?

A debtor is a customer who owes money to the business. 

How it Works

A business will sell goods or services to customers. 

Typically, some of these sales will be made on a cash basis. 

With cash sales, the business deposits the takings in the bank. 

A business will usually also make credit sales.

In this case, there is no money to deposit in the bank.

Instead, the business records the debt owed for the sales in the customer’s account.

Because these customers have a debt with the business, they are known as debtors.