Question

When a machinery is purchased for cash, the cash balance is reduced and to that extent, the amount of machinery as an asset is recorded. This is done to follow which of the accounting principles

Answer 1

This is done according to the Dual Aspect Principle.

What is the Dual Aspect Principle?

• According to the Dual Aspect Principle, each business transaction requires recordation in two different accounts.
• Double-entry accounting which is considered important in all accounting frameworks is based on this principle.
• For example, when a buyer makes a payment to buy something, it transfers the cash while a seller receives it.
• Thus, this fund has a dual effect.

#SPJ3