Deferred Credit

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 28, 2023

Deferred Credit: Definition

The term deferred credit is used in accounting to identify balance sheet items that are not easily classified as either liabilities or owners' equity.

Deferred Credit: Explanation

The category of deferred credit is occasionally used for accounts created by deferring income taxes and the benefits of the investment tax credit.

It also arises when employees are compensated with stock options and when sales are accounted for using the installment method.

The preferred treatment of these items is to classify each of them as a liability or owners' equity based on the one it most closely resembles. In especially confusing situations, note disclosure should be provided to present the facts.

The term "deferred credit" should be used only if no other more descriptive title can be applied.

Deferred Credit FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.