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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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Comments

21 Responses to “What is a credit?”

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