Sew a test stitch diagonally across a folded piece of scrap fabric using standard quality cotton thread. The quality of this stitch will tell you which tension needs adjusting.
Examine the stitch: a balanced stitch will have threads locked between the layers of fabric. Loops on the top side of the fabric tell you that the upper tension is too tight; loops on the bottom appear when the upper tension is too loose.
Turn the tension dial located directly above the needle half a digit clockwise to tighten the upper tension, counterclockwise to loosen. Make small adjustments to the tension until the stitch threads are locked in between the layers of folded fabric.
Sew another stitch diagonally across another piece of test fabric. Pull the ends of the stitch in opposite directions to see how the thread breaks. The upper thread breaks if the upper tension is tighter than the lower; the lower thread breaks if the upper tension is looser than the lower. Both threads break, without the fabric puckering, if the thread is balanced. The cloth puckers if both upper and lower tensions are too tight.
Make further adjustments to the upper tension control knob based on the results of the breakage test. The lower tension is generally assumed to be correct unless the test proves otherwise. To adjust lower tension, stop the machine, raise the needle to its highest position using the hand dial on the right side of the machine, and remove the bobbin cover. Use a small screwdriver to turn the screw clockwise (tighter) or counterclockwise (looser.)