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January 25, 2010

What is a credit?

In accounting there are several meanings of a credit.

In the context of debits and credits, a credit is an entry made on the right side of an account. For example, accountants will state that a payment on a company’s outstanding bills will be recorded with a credit to Cash and a debit to Accounts Payable. Accountants also state that a credit balance is the likely balance for liability and revenue accounts.

A credit is also used when a customer returns some recently purchased goods. For example, the seller might tell the customer that a credit will be given for the returned goods. The seller then processes a credit memo which will be recorded as a credit in the Accounts Receivable records.

The word credit, as opposed to a credit, could refer to the terms of a sale in which the customer is allowed to pay at a later date. Credit could also refer to a company’s ability to borrow money.

Learn more about Debits and Credits.

the accounting coach

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.



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Comments

11 Responses to “What is a credit?”

  1. GAURAV on January 26th, 2010 11:52 pm

    knowledge of basic account.sale tax return,e-return,income tex return,bank reconsile,balance sheet.

  2. habib on February 1st, 2010 3:45 am

    i need material on financial accounting 2nd . if you have please send me.

  3. lola on February 3rd, 2010 3:11 pm

    kool =D

  4. lola on February 3rd, 2010 3:12 pm

    iam going to be a very succesful accountant and iam going to learn everythig there is about Bussiness =D yeah!!!

  5. Shubham on February 3rd, 2010 11:50 pm

    I think credit means if a financiall organitaion do any transaction on his good will basis.

  6. Anam on February 4th, 2010 1:47 am

    What is prorata basis payment?

  7. arshad on February 6th, 2010 1:19 am

    please provide the complete meaning of pay roll

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  9. shiva on February 9th, 2010 10:23 am

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  10. thts me on February 9th, 2010 11:13 am

    any amount which will result in outflow of economic benifit is called credit.. according to me..!

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