dual aspect concept is in which lesson
Answers
Explanation:
The concept of dual aspect can be explained with the help of some examples, which are as follows:
Mohan started a business with Rs 5,00,000 as a primary investment. This investment done by Mohan will have the following effects on the business.
It will increase the assets of the business by Rs 5,00,000. (Cash increases)
Capital of the business increases by Rs. 5,00,000.
Now, let’s say Mohan needed to purchase some goods for an amount of Rs 1,00,000, then this will have the following impact on accounting.
Purchasing goods increases assets (stock) of the business by Rs 1,00,000.
It reduces another asset of the business, i.e. cash is reduced by Rs.1,00,000.
Similarly, if Mohan has to buy equipment on credit for an amount of 10,00,000 from an equipment manufacturing company, then it will result in the following effect on the accounting.
Purchasing of new equipment on credit increases the asset base of the business by Rs. 10,00,000
Purchasing of new equipment on credit results in increasing the liabilities of the business (repay to creditors) by Rs. 10,00,000.
The dual aspect concept states that every business transaction requires recordation in two different accounts. This concept is the basis of double entry accounting, which is required by all accounting frameworks in order to produce reliable financial statements.
The dual aspect concept states that every business transaction requires recordation in two different accounts. This concept is the basis of double entry accounting, which is required by all accounting frameworks in order to produce reliable financial statements.
The dual aspect concept states that every business transaction requires recordation in two different accounts. This concept is the basis of double entry accounting, which is required by all accounting frameworks in order to produce reliable financial statements.