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Introduction To Accounting: Part 17: Dual Aspect Concept

Nishant Kumar
28 Jun 0 0
  1. There are always two aspects of a Business Transaction.

  2. Examples:

    1. Purchase of Machinery for Rs 50,000. The two aspects in this transaction are:

      1. Incoming of Machinery

      2. Outflow of Cash

    2. Sale of Machinery for Rs 75,000. The two aspects in this transaction are:

      1. Outgoing of Machinery

      2. Inflow of Cash

    3. Purchase of Furniture for Rs 50,000. The two aspects in this transaction are:

      1. Incoming of Furniture

      2. Outflow of Cash

    4. According to this concept, every business transaction is recorded as having a dual aspect.

    5. Since every business transaction has a dual aspect, therefore, two accounts are affected.

      1. In the above example of Purchase of Machinery, the following two accounts will be affected:

        1. Machinery A/c

        2. Cash A/c

      2. In the above example of Sale of Machinery, the following two accounts will be affected:

        1. Machinery A/c

        2. Cash A/c

      3. In the above example of Purchase of Furniture, the following two accounts will be affected:

        1. Furniture A/c

        2. Cash A/c

      4. The system of recording transactions based on this principle is called the “Double Entry System”.

      5. We’ll study the Double Entry System later in detail.

 

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