An accounting entry that increases liability, equity, or revenue accounts and decreases asset or expense accounts. Always paired with an equal debit in double-entry bookkeeping.
Understanding Credit
In double-entry bookkeeping, a credit is an entry on the right side of an account ledger. Credits increase liability accounts (like accounts payable and loans), equity accounts (like owner's equity and retained earnings), and revenue accounts (like sales income). Credits decrease asset accounts and expense accounts.
Credits work as the counterpart to debits — every transaction must have matching debits and credits. This dual-entry system creates a self-checking mechanism that makes it much easier to detect errors than single-entry bookkeeping.
The term "credit" comes from the Latin "credere," meaning "to believe" or "to trust." While in everyday language a credit might mean money available to you, in accounting a credit to your bank account actually decreases your cash balance — because cash is an asset account and credits decrease assets.
Why It Matters for Ecommerce
When importing ecommerce transactions into QuickBooks, every entry needs correctly paired credits and debits. Revenue from sales is always a credit, marketplace fees are debits to expense accounts, and payouts are debits to your bank account. Getting this wrong means your financial statements won't balance, and your profit figures will be inaccurate.
Practical Example
When a customer pays $100 for an order: Debit Cash $100 (asset increases), Credit Sales Revenue $100 (revenue increases). When you process a $100 refund: Debit Sales Returns $100 (contra revenue increases), Credit Cash $100 (asset decreases). The credits and debits always mirror each other.
Related Terms
Debit
An accounting entry that increases asset or expense accounts and decreases liability, equity, or revenue accounts. In double-entry bookkeeping, every transaction has equal debits and credits.
AccountingDouble-Entry Bookkeeping
An accounting system where every financial transaction is recorded in at least two accounts — a debit and a credit — ensuring the accounting equation always balances.
AccountingJournal Entry
A record of a financial transaction in the accounting system, containing the date, accounts affected, amounts, and a description. The fundamental building block of double-entry bookkeeping.
Put This Knowledge Into Practice
Now that you understand credit, use PrimeConnect's free accounting tools to convert your ecommerce data into QuickBooks-ready formats — 100% browser-based.
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