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Our small business accountants in Melbourne will explain credits

We all know of credit cards, and credit on products or services, but what is the proper definition and meaning of credit? Our small business accountants in Melbourne will explain it for you!

Credit is a contractual agreement in which the borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest on top of this debt. Credit also refers to an accounting entry that will either decrease assets or increase liabilities and equity on the company’s balance sheet. In turn just like debits, this will go through your businesses accounting professional in Melbourne!

What are the different types of credit?

• Non-revolving credit – monthly repayments (mortgage, student loans)
• Revolving credit – monthly repayments on credit or store cards and depends on how much you spend
• Secured credit – loans secured by an asset, so your car is the collateral if you fall through and don’t repay them
• Unsecured credit – does not involved putting a collateral on the loan
• Short-term loan – short term cash advancement (risky credit)

If you want more advice on credit, be sure to contact our business accountants in Melbourne.