In general, credit refers to all types of lending facilities such as loans extended from one party to another for a certain objective. This also includes arrangements and instruments such as debt securities (bonds), charge-account obligations, and open account balances with banks, financial institutions, and other entities.

In accounting, credit is an entry- or act of making an entry- that increases a liability/ revenue items (such as creditors, equity, revenues, gains) and decreases assets and expenses. In other words, it reflects the accounting entries in an entity’s balance sheet (statement of financial position) that represent either an decrease in an asset or an increase in a liability. In bookkeeping, a credit is an entry on the right side of a double-entry bookkeeping system that reflects the subtraction/ or decrease of an asset or expense or the addition/ increase of a liability or revenue. Debits and credits are equal but represent opposite entries in its balance sheet in the bookkeeping system.

For a customer’s statement of account, credit implies an adjustment made by a business in the customer’s favor, or an increase in its equity.