Credit and Ranking: Difference between pages

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The term 'credit' has a number of different related meanings in finance generally, and in banking in particular.
1.  ''Credit risk - insolvency.''


We will consider them separately in the sections below.
Priority ordering of payouts in a insolvency.


Ranking is particularly important when there are insufficient assets to satisfy all claims.


__TOC__


2.  ''Bank regulation - liquidity.''


== Repayable financial benefits ==
The ordering of liquidity quality of assets, for regulatory liquidity quality.


The provision or availability of loans or other repayable financial benefits by a bank or other lender.


An entity which lends money, or which provides goods or services on deferred payment terms, is 'extending credit' to its customer.
3.  ''Other evaluations.''


 
Any other systematic ordering by quality or importance.
Credit includes borrowings, especially short term ones relating to particular goods or services. 
 
 
== Creditworthiness ==
Credit strength, or 'creditworthiness', means an entity's ability and willingness to meet its financial obligations.
 
 
== Banking ==
==== Credit balances in banking ====
 
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.)
 
==== Credit items in banking ====
In banking, a 'credit' also means an item paid into a bank account.
 
 
== Book-keeping ==
 
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 in book-keeping ====
 
Credit balances represent liabilities or income.
 
(Debit balances represent assets or expenses.)
 
 
==== Credit entries in book-keeping ====
 
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 an expense paid in cash 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.
 
 
== Taxation ==
 
#A 'tax credit' is an amount which can be used to reduce a tax liability.
#Under the UK tax loan relationship rules, a 'credit' is any profit or gain, for example interest income, arising from a loan relationship.
 
 
== Non-repayable financial benefits ==
 
A 'credit' can also mean 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 ==
* [[Acceptance]]
* [[An introduction to equity capital]]
* [[Availability]]
* [[Bookkeeping]]
* [[Cash terms]]
* [[Chartered Institute of Credit Management]]
* [[County court judgment]]
* [[Credit card]]
* [[Credit crunch]]
* [[Credit enhancement]]
* [[Credit institution]]
* [[Credit note]]
* [[Credit rating]]
* [[Credit rating]]
* [[Credit risk]]
* [[Credit risk]]
* [[Credit score]]
* [[Dilution]]
* [[Credit transfer]]
* [[Greenium]]
* [[Credit union]]
* [[Hierarchy]]
* [[Creditworthiness]]
* [[Insolvency]]
* [[Daylight credit]]
* [[Level 1B liquid assets]]
* [[Days sales outstanding ]]
* [[Merit order]]
* [[Debit]]
* [[Net promoter score]]
* [[Double entry]]
* [[Obligation]]
* [[FECMA]]
* [[Order]]
* [[Finance ]]
* [[Pari passu]]
* [[Letter of credit]]
* [[Pari passu clause]]
* [[Loan relationship]]
* [[Preference]]
* [[Net credit/debit position]]
* [[Rank]]
* [[Open account]]
* [[Ratings]]
* [[Overdraft]]
* [[Report card]]
* [[Overdrawn]]
* [[Senior]]
* [[Provisional credit]]
* [[Seniority]]
* [[Tax credit]]
* [[Statement of affairs]]
* [[Structural subordination]]
* [[Subordination]]
* [[Time subordination]]
* [[Unsecured creditor]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]

Revision as of 20:56, 23 July 2022

1. Credit risk - insolvency.

Priority ordering of payouts in a insolvency.

Ranking is particularly important when there are insufficient assets to satisfy all claims.


2. Bank regulation - liquidity.

The ordering of liquidity quality of assets, for regulatory liquidity quality.


3. Other evaluations.

Any other systematic ordering by quality or importance.


See also