Credit
What is a credit in bookkeeping?
Credit is the right side of an account.
Liabilities, capital and income go up on the credit side.
Assets and expenses go down on the credit side.
The word has a second use. On credit means the goods change hands now and the money follows later.
Example
A bakery pays £300.00 rent from the bank. Money has gone out and Bank is an asset, so Bank is credited with £300.00.
Why it matters
A bank statement is written from the bank's side, so money in the account shows there as a credit balance. In the business's own books the same money is a debit balance on Bank.
Practise it
Practise it nowDebit and credit
Ledger Drill is practice, not tax or accounting advice. If this looks wrong, tell us at [email protected].