What Is a Credit Ticket?
The term credit ticket refers to an accounting or bookkeeping transaction that generates a credit in the general ledger. These entries normally represent cash—or the cash value of other assets—accumulated by a business or individual. A receivable is an example of a credit ticket.
Credit tickets can be contrasted with debit tickets, which record a liability or withdrawal. Credit tickets are often used as a placeholder on the accounting books of a firm or individual.
- A credit ticket is a transaction commonly found in accounting and bookkeeping.
- The credit ticket generates a credit in the general ledger.
- Credit tickets were once produced as physical documents but are now represented electronically using accounting software and digital ledgers.
- Credit tickets are offset by debit tickets—entries that signify money that hasn't been paid by the business and is still outstanding.
- The credit and debit ticket process is an important part of double-entry bookkeeping.
How Credit Tickets Work
General ledgers are an important part of accounting and bookkeeping because they serve as the record-keeping system for corporations as well as individuals. They also provide valuable information companies require in order to draw up their financial statements.
Information about the entity's assets, liabilities, expenses, income, revenue can all be found on a general ledger. Data is organized by credits—financial entries coming into the business—and debits—money that is going out. The running balance is updated with every entry.
A credit ticket is an entry used in both accounting and bookkeeping that indicates money or assets that are received by a company or individual. Adding them to the general ledger increases its balance. Therefore, a credit ticket is a transaction in the general ledger that adds money to the account. So someone who makes a deposit to their bank account would notate it with a credit in their check registry, which is a common type of general ledger for individuals.
In the past, credit tickets may have been produced as physical documents or paper tickets until the canceling debit ticket arrived to balance the books. More information about debit tickets is outlined below. Today, such credit placeholders are represented electronically using accounting software and digital ledgers.
You may have heard of the credit-ticket system. This, however, has nothing to do with accounting or bookkeeping. In this context, it refers to a form of emigration prevalent in the mid- to late-nineteenth century, in which brokers advanced the cost of the passage to workers to settle in a new country. The broker retained control of the workers' services until the debt was repaid. The credit-ticket system differed from indentured servitude, which required the worker to work not for money but for a set number of years to repay the loan.
Credit Tickets vs. Debit Tickets
Credit tickets are typically offset on general ledgers by debit tickets. Debit tickets are entries that signify money that hasn't been paid by the business and is still outstanding. Just like the credit ticket, the debit ticket is a placeholder placed on the general ledger. This can either happen simultaneously or in the very near future. The deposit in the bank account, for example, could be a payment for the sale of goods, and the offsetting debit would be in accounts receivable.
A corresponding debit item will be received in the near future to cancel the credit so that the books can balance. This process is a key part of the practice of double-entry accounting employed by most capitalist firms around the world.
Double-entry accounting maintains the basic bookkeeping equation that assets equal liabilities plus owner equity.
Example of a Credit Ticket
Let's take a hypothetical example to show how credit tickets work. A regional bank may take a deposit from a customer in the amount of $200. A credit ticket is placed on the books of the bank on the customer's behalf—the deposit is actually considered a liability for the bank since it owes the depositor the funds if demanded. When the bank makes a loan to somebody else, say in the exact same amount of $200, a debit ticket is entered which cancels the credit ticket. In this case, the loan is considered an asset for the bank since it is owed money from the borrower.