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Question
The fundamental accounting equation Assets = Capital + Liabilities is the formal expression of __________.
The fundamental accounting equation Assets = Capital + Liabilities is the formal expression of __________.
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Solution
The correct option is D Dual aspect concept
Dual aspect is the foundation or basic principle of accounting. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places.
The duality principle is commonly expressed in terms of fundamental Accounting Equation, which is as follows :
Assets = Liabilities + Capital
In other words, the equation states that the assets of a business are always equal to the claims of owners and the outsiders. The claims also called equity of owners is termed as Capital(owners’ equity) and that of outsiders, as Liabilities(creditors equity).
Dual aspect is the foundation or basic principle of accounting. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places.
The duality principle is commonly expressed in terms of fundamental Accounting Equation, which is as follows :
Assets = Liabilities + Capital
In other words, the equation states that the assets of a business are always equal to the claims of owners and the outsiders. The claims also called equity of owners is termed as Capital(owners’ equity) and that of outsiders, as Liabilities(creditors equity).
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