What are credit entries? Definition, examples, and importance in 2026

Credit entries play a key role in every transaction you record, from sales and loans to owner investments and bill payments. In this guide, you’ll learn what credit entries are, how they work alongside debit entries, and why they matter for your business.

Jump to:

• Difference between a debit and credit entries
• Credit entries in accounting 
• Account types and how they are affected
• Practical examples of credit entries in business

Credit entries definition

A credit entry is a type of accounting transaction that shows up on the right side of a T-account or accounting ledger. It increases liabilities, revenues, or equity and decreases assets or expenses, depending on the account type involved.

Relationship with debit entries

In double-entry bookkeeping, every transaction has two sides: a debit and a credit. This pairing keeps your books balanced and your financial reports accurate.

For every credit, there must be an equal debit. That’s because each entry affects at least two accounts, and the totals always need to match. This system supports the basic accounting equation: Assets = Liabilities + Equity.

What's the difference between a debit and a credit entry?

In accounting, debits and credits are the building blocks of every transaction. They work together to keep your books balanced, but they perform opposite functions depending on the account type.

• A debit entry increases asset and expense accounts. It usually means money is going into an account, like your cash, equipment, or rent expenses. For example, when you buy office supplies with cash, you debit the supplies account.
• A credit entry, on the other hand, increases liability, revenue, or equity accounts. It typically shows money going out or an obligation going up. For example, if you take out a loan, you credit your loan account.

So, the key difference between debits and credits is how they affect specific accounts. But together, they make sure that every transaction tells the full story and that your financial reports are complete and accurate.

Purpose in accounting

Credit entries—and their counterparts, debit entries—work together to keep your books balanced. Their main job is to support the fundamental accounting equation:

Assets = Liabilities + Equity

This equation is the foundation of your financial records. When you record a credit entry, you're either increasing liabilities, equity, or revenue or decreasing an asset or expense. To balance that movement, you also record a debit entry on the other side of the transaction.

Let’s say you take out a $5,000 loan:

• You debit your cash account (an asset) to show the money coming in.
• You credit loans payable (a liability) to show you now owe that money.

Both sides of the equation stay balanced, and your books remain accurate.

Ultimately, this system gives you a complete, reliable financial picture. It helps prevent errors, ensures your financial statements make sense, and makes it easier to spot problems before they grow, like missing payments or inconsistent revenue.

Types of accounts and how they are affected by credit entries

Understanding how credit entries change account balances is a big part of mastering double-entry bookkeeping. Every credit entry impacts your books in one of two ways: it either increases or decreases a specific type of account.

Here’s the key rule: whether a credit increases or decreases an account depends on the account type.

Let’s break it down.

Accounts where the credit increases the balance

In some accounts, a credit entry means your business owes more, earns more, or is worth more. These include:

• Liabilities (e.g., accounts payable, loans payable, unearned revenue): A credit adds to what your business owes. It increases the total debt or future obligation.
• Equity (e.g., owner’s capital, retained earnings): A credit increases your share of the business or adds to retained profits.
• Revenue (e.g., sales revenue, service revenue): A credit entry increases the money your business earns from selling products or services.
• Gains (e.g., gain on sale of assets): A credit boosts your non-operating income from transactions like asset sales or investments.

Accounts where credits decrease balances

In other accounts, a credit shows a reduction in value or cost. These include:

• Assets (e.g., cash, accounts receivable, inventory): A credit entry lowers the value of what your business owns.
• Expenses (e.g., rent expense, salaries expense): If you overstate an expense or make an adjustment, you credit the expense account to bring it down.
• Losses (e.g., loss on sale of equipment): You credit a loss account when you’re correcting or lowering a previously recorded loss.

Here’s a chart to help you remember what happens when you credit different types of accounts: