Question

If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or as a credit? If the transaction has the effect of decreasing a liability, is the decrease recorded as debit or as credit?

Answer 1

When a transaction has the effect of decreasing an asset, the decrease will be recorded in the credit side because the balance of all the assets are debited. e.g. when an asset is decreased because of depreciation in that case depreciation is reduced in the debit side of the assets.
On the other hand, when the transaction has the effect of decreasing a liability, the decrease will be recorded in the debit side because the balance of all the liabilities are credit. e.g. when capital is decreased because of the withdrawal by the proprietor, Drawing accounts is debited.