What is Credit?

Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. It also refers to an accounting entry that either decreases assets or increases liabilities and equity that either decreases assets or increases liabilities and equity on the company's balance sheet. Additionally, on the company"s income statement a debit reduces net income, while a credit increases net income.

Credit refers to the creditworthiness or credit history of an individual or company. for eg: someone may say, " he has great credit. so he is not worried about the bank rejecting his mortgage application." In other cases, credit refers to a reduction in the amount one owes. eg: imagine someone owes his credit on his credit card company $1ooo but he returns a purchase worth $ 300 to the store. he receives a credit on his a/c and then owners only $700.

Image source: Google
Ref: https://www.investopedia.com/terms/c/credit.asp