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Dual Aspect Concept – Complete Details

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

About Raju Choudhary

Article by Raju Choudhary Raju has written 537 articles. If you like This post, you can follow CAknowledge on Twitter. Subscribe to CAknowledge feed via RSS or EMAIL to receive instant updates.

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