Credit

A credit entry is used to decrease the value of an asset or increase the value of a liability.  In other words, any benefit giving aspect or outgoing aspect has to be credited in books of accounts. The credits are entered in the right side of the ledger accounts.

For example, a small business owner purchases refrigerator for his business. To record the transaction, she debits the Asset account to increase the asset balance and credits the Cash account to decrease the cash balance.

---

Related Terms

• Cost of Goods Sold
• Closing Balance
• Capital or Equity
• Cash Basis Accounting
• Credit Note
• Cash Flow
• Contra Entries