Credit Limit refers to the monetary limit agreed upon mutually by the seller and the buyer for trading purposes. Credit Limits can be specified for any Ledger account falling under the groups Sundry Debtors and Sundry Creditors. Ledger Accounts created under Sundry Creditors are also allowed for defining Credit Limits for the reason that there may be two-way trade between the parties i.e., you may sell to a Sundry Creditor and buy from a Sundry Debtor Accounts.
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Significance of setting credit limits
'Credit Limits' has been shared with
