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Debtors and Creditors Points of Distinction Debtors Creditors Meaning A debtor is a person or entity that owes money to the other party (the other party is also known as the creditor). A creditor is a person or entity to whom money is owed or who lends money. Nature The debtors will have a debit balRead more
Debtors and Creditors
Example:
Mr. A purchases raw materials from its supplier Mr. D on credit.
Here for Mr. D, Mr. A will be a debtor because the amount is receivable from him.
Similarly, for Mr. A, Mr. D will be his creditor because the amount is payable to him.
Profit and Gain
Profit = Total Income-Total Expenses
Net profit
Operating profit
Capital gain
Long term capital gain
Short term capital gain
Example: A company’s sales for the period are $60,000 and expenses incurred are $40,000. Here the profit calculated will be $20,000 because revenue exceeds expenses.
Profit = Total Income-Total Expenses
= 60,000 – 40,000
= $20,000
Mr. X owned land worth $10,00,000 and after 10 years he sold it at a current market value of $14,00,000. So the gain he earned is $4,00,000. This gain of $4,00,000 will be termed as a capital gain since land is a capital asset.
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