How to know when should an account be debited or credited?

In accounting, the general rule is that when an asset or expense account increases, it should be debited. Conversely, when a liability, equity, or revenue account increases, it should be credited.

Here are some guidelines to help determine when an account should be debited or credited:

1. Debit:
- Increase in assets (e.g. cash, accounts receivable, inventory)
- Increase in expenses (e.g. rent, salaries, utilities)
- Decrease in liabilities (e.g. accounts payable, loans payable)

2. Credit:
- Increase in liabilities (e.g. accounts payable, loans payable)
- Increase in equity (e.g. owner's equity, retained earnings)
- Increase in revenue (e.g. sales, service revenue)
- Decrease in assets (e.g. accounts receivable, inventory)

It is important to remember that every transaction in accounting involves at least two accounts, with one being debited and the other credited. Additionally, the accounting equation (Assets = Liabilities + Equity) must always balance, meaning that the total debits must equal the total credits in a transaction.