The dual Aspect concept states that every financial transaction has twofold effects. These two aspects always have equal effects. In simple terms, we can state that for every debit there exists a credit.
Dual Aspect Concept Examples
For example, Mr. A started his business with an amount of Rs 1,00,000; this will result in an increase in the cash balance on the asset side by Rs 1, 00,000. Due to the operation of duality, the owner’s equity or capital will also increase by an equal amount. We can observe here that the two items that got affected are cash and capital account.
In a similar way, let’s suppose Tom bought goods worth Rs 50,000 on credit then on one hand his assets will increase by Rs 50,000 while on the other hand, his liabilities will also increase by Rs 50,000.
Hence the duality principle can be expressed in terms of fundamental Accounting Equation which can be written as follows: Assets = Liabilities + Capital
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According to The American Institute of Certified Public Accountants “Principles of Accounting are the overall law or rule adopted or proposed as a guide to action, a settled ground or basis of conduct or practice”
After going through this lesson, you will be ready to understand the ‘Basic Accounting Terms’ that we commonly use in Accountancy.
After browsing this lesson, you shall be ready to understand the subsequent Fundamental Accounting Assumptions: Going Concern, Consistency, Accrual