What is Credit?
The term credit has two distinct meanings. One is used to describe an arrangement between two parties where one party agrees to supply the second party with goods or services. The agreement is that the second party will pay for the goods or services at a later date that has been mutually agreed upon. For example, an account with a supplier, a credit card, or a loan. These credit accounts can often incur interest if not paid back within the agreed time frame.
Credit is also the term used to describe how an entry has been recorded for a sum of money received. Essentially, deposits in your business are recorded as credits, and appear on the right-hand side of the account register and payments made are recorded as debits and appear on the left side.