credit
Definition
Credit is an arrangement where one party receives money, goods, or services now and promises to pay for them later. In business, this shows up in two main ways: the credit a lender extends to you when you borrow money, and the credits that reduce what a customer owes you on an invoice or account.
Example
If a customer returns a damaged product and you reduce their bill by $200, you have issued them a $200 credit toward their account.
Watch Out
Extending credit to customers without a written agreement about repayment terms can make it very hard to collect if they refuse to pay.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.