The Basics of Accounting Credits

The Basics of Accounting Credits

  • Increases in assets: A credit is used to record an increase in an asset account. For example, if a business purchases a new piece of equipment, the asset account “equipment” would be credited.
  • Decreases in liabilities: A credit is used to record a decrease in a liability account. For example, if a business pays off a loan, the liability account “loans payable” would be credited.
  • Increases in equity: A credit is used to record an increase in an equity account. For example, if a business receives a cash investment from an owner, the equity account “common stock” would be credited.
  • Decreases in expenses: A credit is used to record a decrease in an expense account. For example, if a business pays for advertising, the expense account “advertising expense” would be credited.

It is important to note that debits and credits are not always used to https://primebusiness.us/ record the same thing. The specific use of debits and credits will vary depending on the accounting system being used.

I hope this helps!

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