Trade Debtors

Definition. Trade debtors are customers who owe a business money for goods or services sold on credit. The UK term matches “accounts receivable” in US accounting.

Where it sits in the accounts. Trade debtors are an asset. They appear under current assets on the balance sheet, usually within “Debtors”, shown net of any provision for doubtful debts.

Worked UK example

A web developer invoices a client £6,000 including VAT on 30-day terms on 10 May.

• 10 May, invoice raised: Debit Trade debtors £6,000, Credit Sales £5,000, Credit VAT £1,000
• 9 June, client pays: Debit Bank £6,000, Credit Trade debtors £6,000

Until the client pays, the £6,000 sits in trade debtors.

FAQs

Are trade debtors an asset or a liability?

An asset. They are amounts the business expects to receive, usually within a year.

What is the difference between trade debtors and trade creditors?

Trade debtors are customers who owe you. Trade creditors are suppliers you owe.

How do you reduce trade debtors?

Send invoices promptly, agree clear credit terms, chase overdue invoices and consider deposits or direct debit.

Tip: debtor days (trade debtors ÷ sales × 365) shows how long customers take to pay you on average.

Related terms: Trade creditors · Credit sale · Credit terms · Provision for doubtful debts