Which of the following best describes a trade creditor?

• A. Customers who owe money.
• B. Accounts representing the cash at bank.
• C. The amounts owed to suppliers.
• D. The VAT payable to HMRC.

Answer: (C)

A trade creditor is someone your business owes money to for goods or services bought on credit in the ordinary course of business. It’s a liability that appears on the balance sheet as amounts outstanding to suppliers. This is why the correct description is the amounts owed to suppliers. It’s different from trade debtors, who are customers that owe you money, and it’s not the cash at bank, which is an asset. VAT payable to HMRC is another liability, but it’s a tax payment to the tax authority, not money you owe to suppliers. In practice, buying on credit increases trade creditors, and paying them decreases this liability.