Explain the dual aspect principle with the help of an example.
Explain the dual aspect principle with the help of an example.
Dual aspect is the foundation or the basic principle of accounting. According to this principle, every transaction entered by a business affects at least two aspects of the business. It is because of this principle that the following accounting equation always holds true.
Assets=Liabilities+Capital
Or
Assets=Claim of Outsiders+Owner's Equity or Capital
Or
Total Assets=Total Liabilities
Example Yuvraj starts a business with a capital of Rs.10,00,000.There are two aspects to the transaction. On one hand, the business has an asset of Rs.10,00,000 (Cash) while on the other hand, it has a liability towards Yuvraj of Rs.10,00,000 (Capital of Yuvraj). Thus, we can say Capital (Equities)=Cash(Assets)
Rs.10,00,000=Rs.10,00,000.
Dual aspect is the foundation or the basic principle of accounting. According to this principle, every transaction entered by a business affects at least two aspects of the business. It is because of this principle that the following accounting equation always holds true.
Assets=Liabilities+Capital
Or
Assets=Claim of Outsiders+Owner's Equity or Capital
Or
Total Assets=Total Liabilities
Example Yuvraj starts a business with a capital of Rs.10,00,000.There are two aspects to the transaction. On one hand, the business has an asset of Rs.10,00,000 (Cash) while on the other hand, it has a liability towards Yuvraj of Rs.10,00,000 (Capital of Yuvraj). Thus, we can say Capital (Equities)=Cash(Assets)
Rs.10,00,000=Rs.10,00,000.
