AR Credit is an accounting term that stands for Accounts Receivable Credit. It’s a transaction that reduces the receivable balance on a company’s balance sheet. When a customer pays off an invoice or credit balance on their account, the money received is credited to the business’s Accounts Receivable account. This is done by executing an AR Credit transaction. An AR Credit signals the entry of a payment from a customer with an open Accounts Receivable balance and reduces the total amount owing to the company. In other words, it helps businesses keep track of the payments they receive from customers, as well as the remaining amount due.