Introduction To Accounting: Part 17: Dual Aspect Concept

There are always two aspects of a Business Transaction.

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.