Credit
In bookkeeping, an entry on the right side of an account that increases liabilities and decreases assets.
In double-entry bookkeeping, a credit is an entry recorded on the right side of a T-account. Credits increase liability, equity, and revenue accounts while decreasing asset and expense accounts. Every transaction requires at least one credit and one matching debit to keep the books balanced.
Example
When a business takes out a $10,000 bank loan, the bookkeeper credits the loan payable account (increasing liabilities by $10,000) and debits cash (increasing assets by $10,000).
Why It Matters for Your Business
Misunderstanding credits leads to posting errors that throw off your entire set of financial statements.
Related Terms
More Accounting Terms
Accounts Payable
Money owed by a business to its suppliers or creditors for goods or services received but not yet paid for.
Accounts Receivable
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Accrual Accounting
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Asset
Any resource owned by a business that has economic value and can provide future benefits.
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific point in time.
Related Financial Guides & Resources
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