Additional Resources

  1. Iu Credit Union []
  2. University Of Michigan Credit Union []
  3. U Of I Community Credit Union: Home []


Credit can be described as a contract agreement between a borrower and lender,stating that the borrower will receive something of value now and will agree to repay the lender upon a pre-agreed date in the future, usually with interest added to the initial borrowed amount or value. It also refers to the borrowing capability of an individual or company.

Secondly, it is an accounting entry that either decreases the assets or increases the liabilities and equity of a company, noted on the balance sheet. Looking at the company's income statement, a debit will reflect as a reduction on the net income, while a credit will reflect as increasing net income.

The specific amount of money that is available to be borrowed by an individual or a company is referred to as credit. This is because it must be paid back to the lender in the future, on an agreed date. For example, making a purchase at your local mall with your Master card is considered a form of credit. You are buying and receiving goods with the understanding and agreement that you will pay for it later.

An accounting example:for instance on a company's balance sheet, a debit will increase the Inventory Account, recognized as an asset, if the company purchases merchandise for resale purposes on credit. But on the other hand, a credit will increase the company's Accounts Payable, categorized as a liability.

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