Meaning

The term ‘Sundry creditors’ consist of two words:  ‘Sundry’ and ‘creditors’. 

The word ‘sundry’ means the items which are not significant enough to be named separately. It also refers to a collection of miscellaneous items.

Creditors are the person from whom money is borrowed or goods are purchased on credit by a business or a non-business entity. They have to be repaid after a period of time which is usually less than or up to one year.

By combining the meaning of both words, ’sundry’ and ‘creditor’, the term ‘sundry creditor’ will refer to the collection of insignificant creditors of an entity.

Back in the days when accounting records were maintained on paper, only the records of those creditors were maintained separately, from whom goods are purchased regularly and in large amounts. 

But there used to be numerous other creditors with whom the transactions were occasional and insignificant. To reduce the paperwork, records of all such creditors were maintained on a single page or book under the head ‘Sundry Creditors’

Nowadays, as accounting records are maintained digitally, hence maintaining records of each and every creditor is not a problem. 

Hence, every creditor whether small or big, is grouped under the head ‘Sundry creditor’ or ‘Trade Creditor’.

Accounting Treatment 

Sundry creditors are the persons to whom a business owes money. 

Hence, as per golden rules of accounting, Sundry creditor is a personal account and the golden rule for personal account is, ‘Debit the receiver and credit the giver’ 

We know sundry creditors are liabilities, hence, as per modern rule of accounting, sundry creditors are credited in case of increase and debited in case of decrease.

Example, a business purchased goods for Rs. 10,000 from ABC & Co. The journal entry will as follows:

Here, ABC & Co is the creditor. It is credited as it is a personal account and the creditor has given the goods to the business, hence the giver is credited.

From point of view of modern rules of accounting, ABC & Co. is a creditor, a liability. On purchase of goods on credit, a liability is created. Hence, ABC & Co A/c is credited.

Balance sheet

Sundry creditor is a current liability, so it is shown on the liabilities side of a balance sheet. Trade payable and accounts payable mean sundry creditors only.

Fictitious assets

On seeing or hearing ‘fictitious’, the words which come to our mind are ‘not true, ‘fake’ or ‘fantasy’. So, fictitious assets are those items that appear on the assets side of the balance sheet but are actually not assets.

In substance, fictitious assets are the expenses and losses that are not completely written off in a financial year and are required to be carried forward to the next financial year.

The examples of fictitious assets are as follows:

1. Deferred Advertisement expense
2. Loss on the issue of debentures.
3. Debit balance of Profit and Loss account ( Net loss )^*
4. Preliminary expenses.

Fictitious assets appear on the asset side of the balance sheet as expenses and losses have a debit balance.

*when the balance sheet is prepared as per Schedule III of Companies Act, the Net loss is shown as a negative figure under the head Reserve and Surplus.

Intangible Assets

Intangible assets mean the assets which don’t have any physical existence. They cannot be seen or touched but are assets because they do provide future economic benefits to the business. Like tangible assets (like machinery and building), they can be also created, purchased or sold.

Like tangible assets are depreciated, intangible assets are gradually written over by amortization over their useful lifespan to account for the economic benefits provided by them.

Following are the examples of intangible assets:

1. Goodwill
2. Brand name
3. Trademark
4. Patents
5. Copyrights

Intangible assets which are created by the business-like goodwill or brand recognition do not appear in the balance sheet.

Only acquired intangible assets can be shown in the balance sheet. Like purchased goodwill, patents, trademarks etc.

Intangible assets also face impairment if their fair value is less than their carrying value after deducting amortization expense. The difference between carrying value and fair value is shown in the Profit and loss A/c as impairment charge and the asset is valued at fair value in the balance sheet.