Debtor Creditor Principle Law and Legal Definition

A debtor is a person or an entity which has a financial obligation to another person or entity. Conversely, a creditor is a person or entity which has a financial claim on another person or entity. Therefore, a debtor has a financial liability to a creditor and a creditor has a financial claim (an asset) on a debtor. For FDI statistical purposes, under the debtor/creditor principle, the FDI assets (both transactions and positions) of the compiling economy are allocated to the economies of residence of the non-resident debtors; its FDI liabilities are allocated to the economies of residence of the non-resident creditors allocated on the basis of the debtor/creditor principle. This principle, recommended by the Benchmark Definition as the basis for geographical allocation, differs from the transactor principle.