Credit

Business, Legal & Accounting Glossary

Definition: Credit



What is the dictionary definition of Credit?

Dictionary Definition


  1. Accounting: An entry on the right-hand side of an account record in double-entry bookkeeping. It has the effect of decreasing an asset or expense account, or of increasing a capital, liability, or revenue account. Related: debit.
  2. Banking: Purchasing power created by banks through lending based on the fractional reserve system.
  3. Commerce: An agreement based largely on trust under which goods, services, or money is exchanged against a promise to pay later. Also called commercial credit.
    Short form of the term letter of credit.

Also:

  • Reliance on the truth of something said or done; faith; trust.
  • uncountable Recognition and respect.
  • countable Acknowledgement of a contribution, especially in the performing arts.

Full Definition of Credit


Credit denotes the borrowing of money by one party from another which is returned at a specified time in the future. A contractual agreement is drafted that determines the amount of money to be credited to the borrower and the date on which the amount is to be repaid. The amount credited is determined according to the capacity of the individual or the company borrowing the money. Interest is also charged for the amount credited by the bank or lender.

Credit also refers to an accounting entry in the balance sheet of the company that increases the liabilities and equity or decreases its assets.

In this respect, Credit is an accounting entry on the right or bottom of a balance sheet. Usually an increase in liabilities or capital, or a reduction in assets. The opposite of credit is debit. Each credit in a balance sheet has a balancing debit. Credit has other usages, as in “You have to pay cash, your credit is no good.” Or “we will credit your account with the refund.”

Debit

Debit reduces the net income of the company according to its income statement, credit increases the net income.

Asset

Asset denotes the economic benefits that are gathered from a particular entity in the future through transaction made in the past.


Examples of Credit in a sentence


He didn’t have enough cash to pay for a holiday this year, so he decided to take out a loan and purchase it on credit.


Cite Term


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Page URL
https://payrollheaven.com/define/credit/
Modern Language Association (MLA):
Credit. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. May 25, 2020 https://payrollheaven.com/define/credit/.
Chicago Manual of Style (CMS):
Credit. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/credit/ (accessed: May 25, 2020).
American Psychological Association (APA):
Credit. PayrollHeaven.com. Retrieved May 25, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/credit/

Definition Sources


Definitions for Credit are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th March, 2020 | 19 Views.