Question

When recording transactions, what is increased by debits and decreased by credits?

Liabilities

Assets

Revenues

Retained earnings

Answer 1

In accounting, **assets** are increased by debits and decreased by credits. Therefore, the correct answer is **Assets**.

To elaborate:

- **Liabilities** are increased by credits and decreased by debits.
- **Revenues** are increased by credits and decreased by debits.
- **Retained earnings** are increased by credits (when profits are retained) and decreased by debits (when there are losses or dividends paid).

So, the primary account type that increases with debits is indeed **Assets**.