Credit: Difference between revisions
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1. In relation to a bank account, a credit balance in the bank's books is one which stands in favour of the customer. | '''1.''' In relation to a bank account, a credit balance in the bank's books is one which stands in favour of the customer. | ||
The bank owes money to the customer. | |||
(Contrasted with a debit, or overdrawn, balance.) | |||
5. In double entry book-keeping, every accounting transaction is recorded with both a Debit entry and a Credit entry in the accounting records. | '''2.''' An item paid into an account. | ||
'''3.''' Borrowings, especially short term ones relating to particular goods or services. | |||
So an entity which lends money, or which provides goods or services on deferred payment terms, is 'extending credit' to its customer. | |||
'''4.''' Credit strength, or creditworthiness, means an entity's capacity and willingness to meet its financial obligations. | |||
'''5.''' In double entry book-keeping, every accounting transaction is recorded with both a Debit entry and a Credit entry in the accounting records. | |||
Credit balances represent liabilities or income. | Credit balances represent liabilities or income. | ||
(Debit balances represent assets or expenses.) | (Debit balances represent assets or expenses.) | ||
6. (CR). In double entry book-keeping a Credit entry is one made: | |||
'''6.''' (CR). In double entry book-keeping a Credit entry is one made: | |||
*To increase a credit balance; or | *To increase a credit balance; or | ||
*To reduce a debit balance. | *To reduce a debit balance. | ||
For example, the book-keeping entry to recognise a cash expense is: | For example, the book-keeping entry to recognise a cash expense is: | ||
DR Expense | DR Expense | ||
CR Bank | CR Bank | ||
If the bank balance is already overdrawn, the CR Bank accounting entry for the payment will increase the overdrawn bank balance (liability) in the balance sheet. | If the bank balance is already overdrawn, the CR Bank accounting entry for the payment will increase the overdrawn bank balance (liability) in the balance sheet. | ||
But if the bank balance is currently an asset (DR balance in the account holder's records), the CR Bank accounting entry for the payment will reduce the positive bank balance (asset) in the balance sheet. | But if the bank balance is currently an asset (DR balance in the account holder's records), the CR Bank accounting entry for the payment will reduce the positive bank balance (asset) in the balance sheet. | ||
7. ''Tax''. | |||
'''7.''' ''Tax''. | |||
A tax credit. | A tax credit. | ||
8. Any amount in favour the holder of the credit, entitling them either to future goods or services without further payment (or for a reduced payment) or alternatively to a repayment in cash. | |||
'''8.''' Any amount in favour the holder of the credit, entitling them either to future goods or services without further payment (or for a reduced payment) or alternatively to a repayment in cash. | |||
== See also == | == See also == | ||
Revision as of 12:40, 17 August 2013
1. In relation to a bank account, a credit balance in the bank's books is one which stands in favour of the customer.
The bank owes money to the customer.
(Contrasted with a debit, or overdrawn, balance.)
2. An item paid into an account.
3. Borrowings, especially short term ones relating to particular goods or services.
So an entity which lends money, or which provides goods or services on deferred payment terms, is 'extending credit' to its customer.
4. Credit strength, or creditworthiness, means an entity's capacity and willingness to meet its financial obligations.
5. In double entry book-keeping, every accounting transaction is recorded with both a Debit entry and a Credit entry in the accounting records.
Credit balances represent liabilities or income.
(Debit balances represent assets or expenses.)
6. (CR). In double entry book-keeping a Credit entry is one made:
- To increase a credit balance; or
- To reduce a debit balance.
For example, the book-keeping entry to recognise a cash expense is:
DR Expense
CR Bank
If the bank balance is already overdrawn, the CR Bank accounting entry for the payment will increase the overdrawn bank balance (liability) in the balance sheet.
But if the bank balance is currently an asset (DR balance in the account holder's records), the CR Bank accounting entry for the payment will reduce the positive bank balance (asset) in the balance sheet.
7. Tax.
A tax credit.
8. Any amount in favour the holder of the credit, entitling them either to future goods or services without further payment (or for a reduced payment) or alternatively to a repayment in cash.
