Sundry Creditors

Debtors or ‘receivables’ are customers who owe funds to the company. They have purchased goods on credit and, payments are yet to be made by them. Sundry debtors, also known as ‘sundry receivables’ refer to a company’s customers who rarely make purchases on credit and the amounts they purchase are not significant. These are usually small scale customers.

Usually, the company maintains separate ledger accounts to record business transactions for each customer. This is justifiable if the customer purchases in larger volumes at frequent intervals. This may not be justifiable for smaller customers, thus it is more convenient to maintain a single ledger account named ‘sundry debtors’ to record such small scale infrequent transactions.

Any person who supplies the goods or services or consumable items to a business firm on credit basis, will be called as sundry creditor by the firm who avails this facility. The suppliers of various items relating to expenses on credit basis, are also called sundry creditors.

Sundry creditors are the liabilities of the firm because the firm is supposed to pay the outstanding amount in future as per terms and conditioned agreed upon by both the parties.  They are called as trade creditors also. But at the time of preparing the final accounts, the amount payable to the creditor is shown as sundry creditors.

Accounts payable means the amount to be paid against goods or services. These are called sundry creditors or sundry supplier also.

This is very important duty of the finance department to arrange money for suppliers in time because if they are not able to pay them in time then the supplies of goods be affected and it will be very difficult to meet the demand of customers also. So, one should be very careful to deal with the payment of suppliers.

Points to be remembered in respect of the payment to suppliers: Following points must be kept in mind while dealing with the suppliers:

• The payment of dues must be made in time as far as possible to maintain the goodwill of the firm.
• Purchase department must make sure that the goods are not purchased in more than required quantity.
• There should proper co-ordination between purchase department and finance department.

Sundry Debtors vs Sundry Creditors

The difference between sundry debtors and sundry creditors is dependent on whether the company is the seller or the purchaser. If the company is the seller, then this results in sundry debtors and if the company is the buyer, this results in sundry creditors. It should also be noted that only infrequent small scale debtors and creditors should be recorded under sundry category; significant credit customers and suppliers should always be treated as trade debtors and trade receivables and should be accounted for separately.

Sundry Creditors is which Type of Account?

Sundry creditors are considered a liability account in accounting. They represent the amounts owed by a business to various suppliers or vendors for goods or services that have been purchased on credit. Sundry creditors are part of the broader category of accounts payable.

In the context of financial accounting, liabilities are obligations that a company owes to external parties, and accounts payable, including sundry creditors, fall under this category. The balance in the sundry creditors account reflects the total amount the company owes to its various creditors.

The term “sundry” is often used in accounting to refer to various small or miscellaneous items that don’t individually warrant a separate ledger account. Sundry creditors, therefore, capture the amounts owed to numerous miscellaneous creditors. As payments are made to these creditors, the corresponding amounts are debited from the sundry creditors account, reducing the liability.

How to Record Sundry Creditors?

Recording sundry creditors involves capturing the amounts owed to various suppliers or vendors for goods or services purchased on credit. This process is typically part of the broader accounting cycle and involves the use of journal entries. Here’s a step-by-step guide on how to record sundry creditors:

1. Invoice Received:

When a company receives an invoice from a supplier for goods or services purchased on credit, the first step is to record the transaction. The journal entry is as follows:

• Debit: Relevant Expense Account or Asset Account
• Credit: Sundry Creditors (Accounts Payable)

This entry increases the expense or asset account associated with the purchase and creates a liability in the form of accounts payable.

2. Payment to Sundry Creditors:

When the company makes a payment to the sundry creditors, the following journal entry is made:

• Debit: Sundry Creditors (Accounts Payable)
• Credit: Bank or Cash

This entry reflects the reduction in the liability (sundry creditors) as the payment is made. The bank or cash account is credited to show the outflow of funds.

3. Discounts or Adjustments:

If there are any early payment discounts or adjustments to the invoice amount, these should be recorded accordingly. For example, if a prompt payment discount is offered and taken, the entry would be:

• Debit: Sundry Creditors (Accounts Payable)
• Credit: Discounts Received or Cash

4. Accrual Adjustments:

At the end of an accounting period, accrual adjustments may be necessary to account for expenses that have been incurred but not yet recorded. For sundry creditors, this may involve estimating the amount of outstanding invoices. The entry could be:

• Debit: Relevant Expense Account
• Credit: Sundry Creditors (Accounts Payable)

Example:

Let’s consider a specific example:

Suppose a company receives an invoice from a supplier for $1,000 worth of goods. The entry would be:

• Debit: Inventory or Expense Account (e.g., Purchases) – $1,000
• Credit: Sundry Creditors (Accounts Payable) – $1,000

When the company pays $800 to the supplier, the entry would be:

• Debit: Sundry Creditors (Accounts Payable) – $800
• Credit: Bank or Cash – $800

Remember that the specific accounts used may vary based on the nature of the transaction and the company’s chart of accounts.

Important Considerations:

• Consistency in Accounts:

Ensure consistency in the accounts used for recording sundry creditors across all transactions. This consistency is crucial for accurate financial reporting.

• Timely Recording:

Record transactions promptly to maintain up-to-date and accurate financial records.

• Accurate Information:

Verify the accuracy of the information on invoices and payment details to avoid errors in recording.

• Compliance with Accounting Standards:

Ensure that recording practices comply with relevant accounting standards and guidelines.

• Use of Accounting Software:

Many businesses use accounting software that automates the recording process, ensuring efficiency and accuracy.

Always consult with an accountant or financial professional to tailor the recording process to the specific needs and requirements of your business.

Sundry Creditors in Balance Sheet

Debit: Inventory or Expense Account

• This depends on the nature of the purchase. If it’s the purchase of inventory, debit the inventory account. If it’s an expense, debit the relevant expense account.

Debit: Inventory (or relevant expense account) – $1,000

Credit: Sundry Creditors (Accounts Payable)

• This reflects the liability created by the purchase on credit. The amount is credited to the sundry creditors account.

Credit: Sundry Creditors (Accounts Payable) – $1,000