An accounting entry that increases liability, equity, and revenue accounts, and decreases asset and expense accounts. Always recorded on the right side of a T-account.
Credit is the counterpart to debit in double-entry bookkeeping. Every journal entry that has a debit must have an equal credit — this is the fundamental rule that keeps accounting records balanced. Like debits, the effect of a credit depends on the account type.
The rule: Crediting a liability, equity, or revenue account increases it. Crediting an asset or expense account decreases it. Revenue accounts have normal credit balances — they grow when credited. When you make a sale, you credit a revenue account (Sales) because the business has earned income.
In practice: Perlas Bakery earns ₱25,000 in cash sales for the day. Journal entry: Debit Cash ₱25,000 (asset increases — cash comes in) | Credit Sales Revenue ₱25,000 (revenue increases — income is earned). Both effects are correct and logical: more cash, more sales.
Why it matters: The distinction between debit and credit is what makes accounting self-checking. Because every transaction requires equal debits and credits, mathematical errors — posting to one account but not the other — immediately break the balance and are caught in the Trial Balance. This built-in error detection is why double-entry bookkeeping has been the global standard for over 500 years.
When business owners receive bank statements showing "Credit ₱50,000" — this means the bank is crediting their account (increasing the bank's liability to the depositor). From the bank's perspective, your deposit is their liability. This can seem counterintuitive until you understand that "debit" and "credit" are relative terms depending on whose books you are looking at.