Credit
A credit is the right side of a journal entry, and it increases liability, equity, and income accounts while decreasing asset and expense accounts.
In short
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.
Also called: Cr, credit entry
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.
What people get wrong
- 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.
Common questions
- Why is a credit-card charge a credit, not a debit?
- 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.
- Is a credit always a good thing?
- 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.
Machine-readable: /api/knowledge/concept:credit