Credit (accounting)

A credit in accounting is a movement that is collected in the credit part of an accounting entry.

An accounting entry is made up of two parts: debit and credit. The debit is on the left side and the credit on the right side. Visually it would be like this:

When we talk about credit or pay from the accounting point of view, we are always referring to an accounting entry to credit. Now this does not mean that the meaning is always the same. Depending on whether it is an asset account or a liability account, a credit will register an increase or a decrease.

It is worth mentioning that the term subscription used in other contexts is synonymous with paying. When they pay us a certain amount, it means that they are going to pay us. The opposite concept is to charge, to make a charge. For example, a charge will be made to your bank account. They are saying that they are going to charge you something.

Next, we will explain how this fact applies to asset accounts and liability accounts.

Credit to asset accounts

Taking the above into account, when we talk about paying and the account is active, we will record an accounting entry on the credit side. Remember that the payment movement is always in credit.

As long as the account is an asset account, a credit to the account implies a decrease in the value of the asset. It makes sense, since if paying is synonymous with paying, our assets will decrease.

Credit to liability accounts

On the other hand, in the liability accounts when we speak of paying and the account is of liability, we will record an accounting entry in the credit part. Remember once again that compost and credit go hand in hand.

As long as the account is a liability, a credit into the account represents an increase in the value of the liability. Given that paying is paying, and when we acquire a liability it is something that we must end up paying, it makes sense to say that we are paying it.

A memory trick to remember that compost and credit are related is to remember that you start them by pronouncing "A" with the same letter. Since in Spanish the letter "h" is silent, it is as if they began with the same letter. Of course, don't even think about writing have without "h".