Credit is a liability. True or false?

Understand the Problem

The question is asking whether the statement 'Credit is a liability' is true or false. This involves understanding the nature of credit in accounting and finance, where credit typically refers to an entry that increases liabilities or equity, and hence it can be categorized as a liability.

More Information

In accounting, credit entries are made to increase liability, equity, or revenue accounts. Since credit increases liabilities, the statement is true. Liabilities are obligations that a company owes, and their normal balance is a credit balance.

Tips

A common mistake is confusing the terms 'credit' and 'debit.' Credits increase liabilities, unlike debits that decrease them.

Sources

• Credit is a liability. True or false? - Homework Study - homework.study.com