Question

accounting is always based on

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Answer 1

Double Entry System of Accounting is based on dual aspect. That means, for every business transaction, there are affects in books of account. For every debit entry, there will be a credit and vice versa.

Accounting Equation can be defined as:

Owners Equity+Liabilities=Fixed Assets+ Current Assets

If Good worth Rs.10000 purchased on credit, it will affect two accounts i.e. Goods account and liability account.

Now Accounting equation will be as under:

Owners Equity+Rs.10000 (Liability) = Fixed Assets+ Rs.10000 (Goods).


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