In accounting there are several meanings of a credit.

In the context of debits and credits, a credit is an entry made on the right side of an account. For example, accountants will state that a payment on a company's outstanding bills will be recorded with a credit to Cash and a debit to Accounts Payable. Accountants also state that a credit balance is the likely balance for liability and revenue accounts.

A credit is also used when a customer returns some recently purchased goods. For example, the seller might tell the customer that a credit will be given for the returned goods. The seller then processes a credit memo which will be recorded as a credit in the Accounts Receivable records.

The word credit, as opposed to a credit, could refer to the terms of a sale in which the customer is allowed to pay at a later date. Credit could also refer to a company's ability to borrow money.

To learn more, see the Related Topics listed below: