What is meant by credit?

In the simplest form, credit refers to the sum of money that is given to the borrower to carry out an immediate purchase/investment and is repaid by the borrower at a later stage. This sum of repayment generally includes interest payments along with the repayment of the principal. In accounts, the term refers to a bookkeeping entry that either increases liabilities or decreases assets in a balance sheet. Sometimes, credit may also refer to a person’s creditworthiness. If someone “has credit” then it can mean that he/she has enough creditworthiness to be issued credit from the bank as and when required.