Definition: The term credit comes from the Latin creditum meaning "that which is entrusted or loaned".
In accounting, credit is the negative side of a
balance sheet account and the positive side of a result item.
Crediting an account implies that you keep a negative amount in the account.
As the outcome will be increased by a negative amount, it may confuse some before you get quite a grip on the so-called double bookkeeping principle.
An overview of credit in accounting
- Crediting a debtor account implies that debt increases
- Crediting an asset account implies that the assets are reduced
- Crediting an income account implies that revenues increase
- Crediting an expense account implies that the costs reduce
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Increased accounts
A Credit will increase these accounts:
- Liabilities (Notes Payable, Accounts Payable, Interest Payable, etc.)
- Revenues (Sales, Service Revenues, Fees Earned, Interest Revenues, etc.)
- Gains (Gain on Sale of Assets, Gain on Retirement of Bonds, etc.)
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Decreased accounts
A Credit will decrease these accounts: