What term describes the right side of an account in accounting?

The term that describes the right side of an account in accounting is "credit." In the double-entry accounting system, each transaction affects at least two accounts and is recorded in such a way that the accounting equation (Assets = Liabilities + Equity) remains balanced.

On the right side of an account, credits increase liability and equity accounts while decreasing asset accounts. This is crucial for maintaining the integrity of financial statements. For example, when a company borrows money, it records the transaction by crediting a liability account, indicating an increase in obligations. Conversely, when a company earns revenue, it also credits a revenue account, signaling an increase in equity.

Understanding this concept is fundamental for accurate financial recording and reporting, enabling accountants to track a company’s financial performance accurately. The other terms refer to different aspects of accounting; for instance, debits occur on the left side of an account and typically signify increases to assets or expenses. Assets are items of value owned by the business, while equity represents the owner's interest in the company, but they do not pertain specifically to the right side of an account.