Loading Tutorstips...
✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Advertisement
Advertisement
Advertisement
Advertisement
In normal Language the meaning of credit, we have learned as the amount payable to someone. In Accounting credit means subtracting some amount form the account.
It is adding an amount of cash or fund into the owner's equity, liabilities or income accounts and subtracting from the expenses or assets accounts. The word Credit is also abbreviated as "Cr." It is always operated opposite to the Debit. It is always shown on the Right Side of the ledger accounts.
The Credit, affect the accounts as per their type or nature. These are two types shown below: -
The balance of all types of liabilities (owner's equity) and income accounts will be increased by the Credit amount. Like if Sundry Creditor a/c has a balance of 10,000/-, Suppose if the company/firm purchases goods from their vendor on the credit of 1,000, then it will be Credited to the Sundry Creditor's account, So the balance of Sundry Creditors account will be 11,000/-.
| The Credit balance of Sundry Creditor Account | -10,000 |
| Less: - Amount of Credit | -1,000 |
| Total Balance (Minus: Minus = Plus) | -11,000 |
Note - Credit balance is also known as a negative balance. All liabilities always have a credit balance.
The balance of all types of assets and expenses accounts will be decreased by the debit amount. Like if Bank a/c has a balance of 7,000/-, Suppose if the company/firm paid a Salary of 1,000, then it will be credited to the Bank account, So the remaining balance of the Bank account will be 6,000/-.
| The Debit balance of Bank Account | 7,000 |
| Less: - Amount of Debit | -1,000 |
| Total Balance(Plus: Minus = Minus) |
6,000 |
Note - Debit balance is also known as a Positive balance. All assets always have a debit balance.
If the Credit side of an account exceeds the Debit side, the account is said to have a "Credit balance" to the extent of such difference which is put on the Debit side of the account in order to make the totals of the two sides equal and against this amount, the words "By balance C/d" (C/d means carried down) is written in the particulars column. This balance is brought down on the Credit side while opening the account for the next period and the words "To balance B/d" (B/d Means Brought down) are written in the particulars column.
The Credit Note is the document received by the seller of goods from the buyer against the return of goods which he had purchased from the seller. It is also a document that consists of information on the debited amount, reasons for Debit, Invoice number & date, and description of goods.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "What is the meaning of Credit in Accounting", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Terms of Financial Accounting.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
You can take our custom-built interactive practice quiz directly on this page to test your understanding of "What is the meaning of Credit in Accounting" instantly.
