Full Form of Cr

Full Form of Cr – Credit

The full form of CR is Credit. The word credit has different meanings in the world of financial accounting as sometimes it can be referred to as a journal entry made on the right-hand side of an account representing a rise in assets and records all the income and revenues (in nominal accountsNominal AccountsNominal Accounts are the general ledger accounts which are closed by the end of an accounting period. Their balance at the end of period comes to zero so they don't appear in the balance sheet.read more), what goes out (in real accountsReal AccountsReal accounts do not close their balances at the end of the financial year but retain and carry forward their closing balance from one accounting year to another. In other words, the closing balance of these accounts in one accounting year becomes the opening balance of the succeeding accounting year.read more) and is regarded as a giver (in personal accounts) and sometimes, it also represents an agreement between a borrower and a lender concerning the loan amount borrowed by the former from the latter for a particular time period.

Characteristics of Credit

The five characteristics of credit are discussed as follows-

Types of Credit

Credit can be of various forms. It can be in the form of financial credit or bank loans, which includes mortgages, home loans, car loans, educational loans, signature loans, business loans, and other creditCreditA line of credit is an agreement between a customer and a bank, allowing the customer a ceiling limit of borrowing. The borrower can access any amount within the credit limit and pays interest; this provides flexibility to run a business.read more lines. There are other forms of credit too. For example, the exchange of products or services against deferred payment, the credit offered by the suppliers or creditors to the company against the number of raw-materials purchased by the latter, etc.

Full-Form-of-CR

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Full Form of Cr (wallstreetmojo.com)

Examples of Credit

ABC Limited took a loan of $20,000. The company has an underlying credit of $10,000 and a debit of $200. The carrying balance of the company is $9,800 ($10,000-$200). This means ABC owes $9,800 to its creditors. The credit balanceCredit BalanceCredit Balance is the capital amount that a company owes to its customers & it is reflected on the right side of the General Ledger Account. Usually, Liability accounts, Revenue accounts, Equity Accounts, Contra-Expense & Contra-Asset accounts tend to have the credit balance. read more at the end of that year would be $29,800 ($20,000+$9,800).

Difference Between Credit and Debit

The difference between credit and debit are discussed as follows-

Advantages

The advantages of credit are discussed as follows-

  • Credit gives the borrowers the option to buy something even if they lack sufficient funds for making such a transaction in the present and enables them to repay the loan amount over time, all at once or in EMIs (monthly installments).
  • The credit option makes it easier for borrowers to buy what they want at their own pace without worrying about the available funds.
  • Credit options taken from a banking or financial institution reduce the borrowers’ burden to pay the full amount in one shot. The borrowers can simply make a down-payment and avail the option of paying monthly EMIs spread over a period of time.

Disadvantages

The disadvantages of credit are as follows-

  • The borrowers will be required to pay an interest amount on loan taken.
  • The borrowers will be required to pay late fees in case they default a payment.
  • The borrowers can even impact their creditworthiness if they default on their loan payments.
  • Impacted credit rating will make it difficult for borrowers to secure a loan or credit in the future.

Conclusion

The characteristics of Credit or Cr are character, capacity, capital, collateral, and conditions. Credit refers to a journal entry that is recorded on the right-hand side of a T ledger account. Credit has its advantages and disadvantages. A borrower must self-evaluate whether they are ready or whether they must borrow a loan to fulfill a specific purpose. A borrower must look at both the advantages and disadvantages of taking credit and then self assess himself and his purpose behind making such a decision to make the best use of his decision and not have to regret in the future.

Recommended Articles

This has been a guide to the Full Form of Cr (Credit) and its definition. Here we discuss characteristics, types, and examples of Cr along with its differences from debit. You may refer to the following articles to learn more about finance –

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *