Final answer:
A credit balance in an account indicates an overpayment and a need for a refund to the account holder.
Explanation:
Credit balance describes the state of an account when an overpayment has been made and a refund is owed to the account holder. In this situation, the account shows a positive balance due to the excess payment made.
When a credit balance exists, it indicates that the account holder has paid more than the required amount, leading to a surplus that needs to be returned to them.
For financial clarity and proper accounting treatment, the credit balance should be refunded to the account holder promptly to reconcile the overpayment.
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