Credit
In accounting, credit raises the balance of liability or equity accounts, and lowers the balance of asset accounts. In the T-account depiction, it is on the right-hand side.
Contents |
Expanded Definition
Even though "credit" has the common sense meaning of "raising the balance," it has a very specific meaning in accounting and does not necessarily mean what common sense says it does. For asset accounts, "credit" means a reduction in the balance.
When you deposit cash into a savings account, you are "credited" that amount. That is from the bank's perspective. Your account is a liability to them -- they owe you, at some time, the balance in that account. So what they are doing is increasing that liability balance or crediting it.
RSS Headlines
Fool UK