Financial Glossary
Credit (Accounting)
In double-entry bookkeeping, a credit is an entry recorded on the right side of an account. Credits increase liability, equity, and revenue accounts and decrease asset and expense accounts. Every transaction has at least one credit that is balanced by an equal total of debits, keeping the books in balance.
Problem & Application
When a bank or vendor tells an owner their "account has been credited," the meaning depends on whose books you are reading: a credit to your revenue account is income earned, while a credit memo from a supplier reduces what you owe. For STR hosts, campground operators, and other owner-operated businesses, miscategorizing credits is one of the most common reasons month-end numbers do not tie out and revenue gets overstated or understated.
In Short
Understanding what a credit does to each type of account is the foundation of reading your own books accurately. Get the direction wrong and every downstream report inherits the error.