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Dual Aspect Concept

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Dual Aspect Concept – Every Transaction has two effects: Debit and Credit. Both are opposite and equal also known as Double Entry System. Accounting equation has been derived on the basis of dual aspect concept as under:

Assets = Liabilities + Equity (Balance Sheet Equation)

Net Profit = Income – Expenses (Profit & Loss Equation)

Dual Aspect Concept in Detailed – This concept is the core of double entry book-keeping. Every transaction or event has two aspects:

  1. It increases one Asset and decreases other Asset;
  2. It increases an Asset and simultaneously increases Liability;
  3. It decreases one Asset, increases another Asset;
  4. It decreases one Asset, decreases a Liability.


  1. It increases one Liability, decreases other Liability;
  2. It increases a Liability, increases an Asset;
  3. It decreases Liability, increases other Liability;
  4. It decreases Liability, decreases an Asset.

So every transaction and event has two aspects.

This gives basic accounting equation :

Equity (E) + Liabilities (L) = Assets (A)


Equity (E)= Assets (A) – Liabilities(L)

Or, Equity + Long Term Liabilities + Current Liabilities = Fixed Assets + Current Assets
Or, Equity + Long Term Liabilities = Fixed Assets + (Current Assets – Current Liabilities)
Or, Equity = Fixed Assets + Working Capital – Long Term Liabilities
Whatever is received as funds is either expended (Expenses) – Debited to Profit & Loss Account

Or Lost – Losses are transferred to Capital Account

Or saved – Shown on the Assets side of the Balance Sheet

Therefore, Capital + Income/Profits + Liabilities = Expenses + Net Loss + Assets Or, Capital + Income – Expenses + Net Profits = Assets – Liabilities

Since the net profit / loss is transferred to equity, the net effect is

Equity + Liabilities = Assets

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