Glossary
Credit
An entry on the right side of an account; it increases liabilities, capital and income and decreases assets and expenses.
What it means
The right-hand side of a ledger account; a credit entry records value given or an increase in a liability, capital or income.
Example
When a sale is made, the sales account is credited.
Why it matters
Every debit has an equal credit, so identifying the credit side completes the entry.
In practice
A credit is posted on the right-hand side of a ledger account. It increases liabilities, capital and income but decreases assets and expenses. A supplier's account (trade payables) and a sales account both carry credit balances and appear in the credit column of the trial balance.
For instance, selling goods for RM900 on credit means the customer's receivable is debited RM900 (an asset rises) and the sales account is credited RM900 (income rises).
Credit is easily confused with debit, and also with buying "on credit" in everyday speech. In bookkeeping, credit simply means the right side of an account. It does not mean borrowing. A quick test: income and amounts owed grow with credits, while assets and costs grow with debits.
A missing or duplicated credit unbalances the trial balance. This is how such an error is first noticed, before the financial statements are prepared.
If credits and debits still feel back to front, one of our teachers can drill them with you using questions from your own syllabus. Book a trial class.
Related terms
Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 2.1 The double entry system of book-keeping (page 12).
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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