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March 10, 2009

What is a credit?

In bookkeeping and accounting, a credit could refer to the entry on the right side of a T-account. A credit could also be a verb that means the act of recording an amount on the right side of a T-account.

A credit entry in an asset account will reduce the account’s usual debit entry.  A credit entry in a revenue, liability, or owner’s equity account will increase the usual credit balance.

A credit could also mean your bank has increased your bank account balance. Your bank account is a liability for your bank and when your bank account increases, your bank has a larger obligation to you.

Credit can also refer to loans, such as line of credit, letter of credit, credit rating, as so on.

Learn more about Debits and Credits.

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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

27 Responses to “What is a credit?”

  1. kg on March 18th, 2009 9:16 am

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  20. Im doing bookkeeping & Accounts very helpful and assists in understanding on August 15th, 2009 8:13 am

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  21. Vikash Kumar on September 19th, 2009 1:54 am

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  22. linda on December 7th, 2009 4:22 pm

    is their a certain way or rule to be able to tell if an account is a debit or credit. i am having problems understanding this. can anyone explain it to me.

  23. ACoach on December 8th, 2009 11:37 am

    For the debit and credit rules, see the Explanation of Debits and Credits, the Drills on Debits and Credits, and also the Explanation of the Accounting Equation. All are free to read on AccountingCoach.com

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