Credit (Accounting)

What is Credit in Accounting?

In accounting, a credit is an entry made on the right-hand side of a double-entry bookkeeping system. It typically increases the balances of liabilities, revenues, and equity accounts, while it decreases the balances of assets and expenses. Credits play a crucial role in ensuring the accounting equation remains balanced.

Short Description: An entry on the right side of a double-entry bookkeeping system that typically increases liabilities, revenues, and equity, and decreases assets and expenses.

• Liabilities: When credited, it indicates an increase in the obligations owed by the business.
• Revenues: A credit entry increases revenue, reflecting earned income.
• Equity: Crediting equity accounts signifies an increase in the owners' interest.
• Assets: A credit reduces the assets since money is leaving the asset accounts.
• Expenses: Credits decrease expenses, which is less common since expenses are typically debited.

Credits are essential in maintaining the duality in financial transactions and ensuring proper financial analyses and reporting are conducted.