Credit
Also called: Cr
The right side of an entry. Credits increase liabilities, equity and income and decrease assets and expenses.
In detail
A credit is the right-hand entry of a voucher. It shows where the value came from: an asset that went out, income earned, or a new obligation to someone else. Crediting Bank means money left the account; crediting Sale of Goods means you earned revenue; crediting VAT Payable or Creditors means the business now owes that amount. On an asset or expense account a credit reduces the balance, which is why depreciation credits Accumulated Depreciation to lower the book value of a laptop. Reading the Cr column of the General Ledger tells you what went out or what is now owed. A credit balance on Cash means something was posted the wrong way round.
Formula
Credit raises Liabilities, Equity and Income; credit lowers Assets and Expenses.
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Office Rent | Rs 25,000 | |
| Bank Account (rename me) | Rs 25,000 |
How to record it in BRAccount
- 01Open the rent Journal Entry from Invoicing > Journal Entry.
- 02Look at the Bank Account (rename me) row: Rs 25,000 sits in the Credit column.
- 03Open Financial Reports > General Ledger with Account = Bank Account (rename me).
- 04Every payment out appears as a credit; every receipt as a debit; the running Balance column nets them.
- 05If the bank balance shows as a credit figure, find the Payment Entry posted with the wrong type and cancel it.
When to use it
Read the Cr column to see what went out or what the business now owes.
Example from the demo books
The same rent payment credits Bank Account Rs 25,000 (an asset goes down).