In double-entry terms, which side increases asset accounts, and which side increases liability accounts?

• A. Debits increase liability accounts; credits increase asset accounts.
• B. Debits increase asset accounts; credits increase liability accounts.
• C. Debits increase revenue; credits increase expenses.
• D. Debits increase equity; credits increase cash.

Answer: (B)

In double-entry bookkeeping, increases in assets are recorded on the debit side, while increases in liabilities are recorded on the credit side. This means the side that increases asset accounts is the debit, and the side that increases liability accounts is the credit. For example, buying equipment with cash debits the asset (equipment) and credits the cash (another asset), while borrowing money credits a liability (loan payable) and debits cash. The other options mix up these relationships: one reverses which side affects assets versus liabilities, another shifts focus to revenues and expenses, and the last misstates how equity and cash respond in terms of debits and credits.