In double-entry accounting, what is the best definition of a credit?

In double-entry accounting, a credit is defined as a transaction that has the effect of decreasing assets or expenses while simultaneously increasing liabilities, owner's equity, or revenue. This understanding aligns with the fundamental principles of double-entry accounting, where every financial transaction impacts at least two accounts in such a way that the accounting equation (Assets = Liabilities + Owner's Equity) remains balanced.

When a credit is recorded, it reflects that the company has either incurred more obligations (increased liabilities) or gained more wealth (increased owner's equity or revenue). For example, when a business earns revenue, it credits the revenue account, reflecting an increase in financial resources available to the business, while the corresponding decrease in assets could occur if cash is received, leading to a balanced accounting equation.

This definition encapsulates the broader implications of credit transactions in the accounting system, making it essential for students and practitioners to grasp this concept for accurate financial reporting and analysis.