In finance, credit means to get money as debt. It also means to gets current asset or fixed asset without pay its price immediately. A person or company who gets money will be responsible to repay its principle amount with interest after certain time. In case, if he purchases goods on credit, then there is no need to pay interest on the credit amount. Bonds are issued if company gets credit from public, then company is also responsible to pay interest.
In credit, a party who gets loan will be debtor of other part and other party will become creditor for the first party who gets cash. If debtor does not pay the amount of credit then it becomes bad debts which is the loss of loan providing party. It is very necessary to maintain provision for doubtful debts for creating reserve for purchasing stock or paying other expenses if we will receive fund from debtors for given credit in reality.
In credit, a party who gets loan will be debtor of other part and other party will become creditor for the first party who gets cash. If debtor does not pay the amount of credit then it becomes bad debts which is the loss of loan providing party. It is very necessary to maintain provision for doubtful debts for creating reserve for purchasing stock or paying other expenses if we will receive fund from debtors for given credit in reality.
