{"id":"concept:credit","kind":"concept","label":"Credit","synonyms":["Cr","credit entry"],"definition":"A credit is the right side of a journal entry, and it increases liability, equity, and income accounts while decreasing asset and expense accounts.","summary":"Credit is the mirror of debit: the right side of an entry. It grows liabilities, equity, and income — a bigger credit card balance owed is a credit, and so is a sale hitting revenue. On an asset or expense account, a credit does the opposite: it shrinks the balance.","explanation":["Credit is debit's mirror image, and the same warning applies: it is a side of an entry, not a judgment. A credit isn't a deposit and it isn't good news by default — what it does depends entirely on the account it lands in.","Liabilities, equity, and income are credit-normal, meaning a credit grows them. A new $340 charge on a credit card is a credit, because the balance you owe just went up. A $2,000 sale is a credit to Service Revenue, because income just went up. Both accounts gained value in their own terms, and both gains are recorded as credits.","On an asset or expense account, a credit shrinks the balance instead. Paying cash out of Checking is a credit, because that asset just went down. This is the specific place people get tripped up with credit cards: the charge itself — the moment you spend money — is a credit, not a debit, because it increases what you owe. It only feels backwards because spending from cash or checking is normally a credit in the opposite, familiar sense of \"money leaving.\"","This is also why a \"credit\" on a bank statement isn't the same idea as a credit in bookkeeping. A bank uses \"credit\" loosely to mean money added to the account you're looking at. In bookkeeping, credit is a side of the ledger — and for a credit card, a bigger balance owed is itself a credit, the opposite of what \"credit\" tends to suggest in casual use. Internally, BalanceMCP stores every credit as a negative number of cents; reports then flip liability, equity, and income balances back to positive for display, so a $500 card balance reads as \"$500 owed,\" not as a negative number that only makes sense once you know the internal convention."],"commonMistakes":["Assuming a credit always means money was added, the way a bank statement uses the word — a credit-card purchase is a credit, and it means you owe more, not less.","Treating \"credit\" as automatically good news. A credit to a liability account is you owing more, not a gain.","Forgetting that reports display liabilities as positive \"amount owed\" figures even though the number is stored internally as negative — both are correct, just different audiences."],"category":"fundamentals","questions":[{"question":"Why is a credit-card charge a credit, not a debit?","answer":"Because a charge increases what you owe, and liabilities grow with credits. It only feels backwards because spending elsewhere — from cash or checking — is normally the opposite direction."},{"question":"Is a credit always a good thing?","answer":"No. A credit to your income account is good; a credit to your credit card balance means you owe more. The account it hits determines what growing actually means."}],"url":"/glossary/credit","relatedTo":[{"id":"concept:debit","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Adebit"},{"id":"concept:normal-balance","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Anormal-balance"},{"id":"concept:liability","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Aliability"},{"id":"concept:equity","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Aequity"},{"id":"concept:income-account","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Aincome-account"},{"id":"concept:journal-entry","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Ajournal-entry"},{"id":"concept:credit-card-account","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Acredit-card-account"},{"id":"guide:debits-and-credits-explained","relationship":"references","weight":0.7,"api":"/api/knowledge/guide%3Adebits-and-credits-explained"},{"id":"account:2100-credit-card","relationship":"references","weight":0.7,"api":"/api/knowledge/account%3A2100-credit-card"}],"referencedBy":[{"id":"concept:double-entry-bookkeeping","label":"Double-Entry Bookkeeping","url":"/glossary/double-entry-bookkeeping"},{"id":"concept:debit","label":"Debit","url":"/glossary/debit"},{"id":"concept:journal-entry","label":"Journal Entry","url":"/glossary/journal-entry"},{"id":"concept:normal-balance","label":"Normal Balance","url":"/glossary/normal-balance"},{"id":"concept:credit-card-account","label":"Credit Card Account","url":"/glossary/credit-card-account"}],"license":"https://creativecommons.org/licenses/by/4.0/","attribution":"BalanceMCP — https://balancemcp.com"}