What Are Sundry Creditors? Meaning, Examples, and Importance in Business Accounting

Payables and receivables are the most vital cash flow sources of a company, and appropriate management is what makes it possible to get a healthy cash flow and strong supplier relationships.

In this specific situation, sundry creditors define people or businesses to whom we provide goods or services on the credit basis.

The credit may be depends on companies terms and conditions, e.g. If you sale something to your customer without taking immediate amount and you give them period for paying amount against the raised invoice like 7days, 15 days, 1 months, 3 months, Minimum 30 day time acceptable for sundry creditors.

To make it easier for the reader to understand sundry creditors in these dynamics, let's take some time to discuss sundry creditors in relation to other individuals in business, namely, debtors.

What Are Sundry Creditors?

Sundry creditors, or accounts receivable,, are those people or organizations to whom we sale products and services on credit. When an entity purchases a product or service but pays after sometime, the amount owed to the supplier becomes a liability of the firm on its balance sheet.

Key Characteristics of Sundry Creditors

Goods/Services Sold on Credit: Sundry creditors cover the type of creditors that provide a business with its goods or services that allow a credit extension.
Liability in the Balance Sheet: Since the company is liable to pay for the service or goods it has received, then sundry creditors are considered a liability in the ledger.
Accounts Payable: An account liability shows the total amount the company give to the creditors and by when to pay them.

Example of Sundry Creditors

Let’s consider an example to illustrate sundry creditors in action:

Scenario: PBC Ltd. buys goods worth Rs. 15,000 from Jandry Traders on June 31, 2024. PBC Ltd. agrees to pay the amount by Oct 12, 2024. Until the payment is made, Jandry Traders will be listed as a sundry creditor in PBC Ltd.’s financial records.

PBC Ltd. buys goods from Jandry Traders for Rs. 15,000 on Jun 31, 2024.

PBC Ltd. promises to pay the amount by Oct 12, 2024.

Until PBC Ltd.Until PBC Ltd. makes the payment, will be shown as a "sundry creditor" in Jandry Traders financial records.

This means PBC Ltd. is a Customer/ Client of Jandry Traders, here Jandry Traders is a Vendor or Supplier. That is A sundry creditor is simply someone you have the balance amount for which you baught the goods.

Significance of Payables Management

Payables management has a very important effect on a business since it ensures that cash flow is controlled and relationship with suppliers is maintained. When payables do not receive proper management, missed payments, damaged supplier relations, and perhaps cash flow problems might occur.

Tracking Dues: Regularly recording and tracking the amount owed to sundry creditors helps businesses keep track of their liabilities. This practice prevents oversight and ensures timely payments.
Relationship Maintenance with Suppliers: An important aspect of paying your creditors on time is that this will help in making good relations with your Clients. Consider the following case: A supplier takes an early payment discount. In such a situation, a good credit history is necessary to benefit from such discounts or extended credit periods.
Effective Use of Credit Periods Credit periods should be utilized wisely in management sundry creditors. Through accounts, you can specify credit periods, this means the amount of time undertaken in making payments so that you avoid being charged with late fees or strained relationships.

Sundry Creditors vs. Sundry Debtors

This makes it quite fundamental to differentiate sundry creditors from sundry debtors.

Sundry debtors: People or groups who are indebted to a business for goods or services received on credit.

In simple words:

Sundry Creditors: Liability (What the business gives/ Our Vendors or Suppliers pending payments).
Sundry Debtors: Asset (what is owed to the business/ Our Clients or Customers pending payments).

Sundry Creditors in Financial Statements

Sundry creditors appear in various financial statements, thereby depicting their importance in the accounts of a business.

Sundry Creditors in Balance Sheet: Sundry creditors that feature in the balance sheet, this amount is due to suppliers and will stay there until a given bill is paid.
At The Time of Trial Balance Preparation: The amount for sundry creditor should feature on the right side of the trial balance because sundry creditors appear as outstanding liabilities.
Sundry Creditors in Final Accounts: On the final accounts, the sundry creditors fall under the liabilities side where the sum total that a firm give to different suppliers for goods or services supplied on credit will be shown.

Formula for Determining Sundry Creditors

For effective sundry creditor control, businesses commonly use the following formula:

Sundry Creditors =Total Credit Purchases−Total Payments to Creditors

The formula will provide a business with an amount remaining to pay creditors after partial payment or perhaps an amount to pay off creditors in full.

Sundry Creditors in Practice

Sundry creditors are essential to a business’s financial management. For example, a retail business often has multiple suppliers who offer goods on credit. These suppliers are recorded as sundry creditors in the company's financial records.

Conclusion

An understanding and management of sundry creditors is one of the crucial elements in keeping healthy business cash flows and positive relationships with the suppliers. Businesses that track and manage their outstanding payables have a better picture through which they can negotiate much better terms and avoid penalties in smooth financial operations. By keeping an eye on sundry creditors, your business will promote better creditworthiness and prepare a path for long-term financial success.
Simply Sundry Creditors means the vendors or suppliers from whom businesses baught services or goods on credit.