It is believed that the word ‘Credit’ has been derived from the Latin word ‘Credo’ which means “I believe in you” or ‘I have trust on you’. In other words, Credit means a trust or confidence reposed in another person. The concept of credit can be put forth in different words. It is the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.
Whereas the commonly accepted definition in terms of commercial transaction or commercial credit is, “An agreement based largely on trust under which goods, services, or money is exchanged against a promise to pay later,” and is also called as commercial credit.
In terms of Double entry Book keeping system, “It is an entry on the right-hand side of an accounting record & It has the effect of decreasing an asset or expense account, or of increasing a capital, liability, or revenue account.
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