A debtor is a party that has an obligation to repay a debt to a creditor. This debt could originate from a loan, where the debtor has received funds and agreed to pay them back with interest, or from a purchase on credit, where the debtor has acquired goods or services with the promise to pay within a certain timeframe. For instance, if a company buys raw materials from a supplier but arranges to pay for them a month later, the company becomes the debtor, and the supplier is the creditor. While the term is commonly used in personal finance and business accounting, it can also appear in legal contexts, particularly in bankruptcy situations, where the rights and obligations of the debtor are carefully addressed. Effective management of debtors is vital for businesses to ensure consistent cash flow and maintain financial health. Examples of debtors include customers of a business who have outstanding invoices or individuals who have taken out loans from a bank. From an accounting perspective, amounts owed by debtors are recorded as accounts receivable on the balance sheet, which is a component of current assets.