Question

Explain the Dual Aspect Principle.

Explain the following:

The dual aspect concept

Explain the Concept of the Dual Aspect Principle.

Answer 1

1. This principle suggests that every debit has a corresponding and equal credit. There must be a giver of benefit and also a receiver of the same. Suppose X purchases a car for ₹ 3,00,000. He will get the car and will pay cash ₹ 3,00,000. So one account (car) will be debited and another account (cash) will be credited with the same amount.
2. This principle has given rise to the double-entry system. It is due to this principle that both sides of the Balance Sheet are equal, and the accounting equation is always true, i.e., (Capital = Assets - Liabilities)
3. According to this principle, every business transaction has a double (dual) effect on the business. This double effect can be recognised only by recording both aspects of every transaction. There are two sides to every transaction.
4. If one account is debited, any other account must be credited and vice-versa. The system of recording transactions on the basis of this principle is known as the 'Double Entry System'. It is due to this principle that the two sides of the Balance Sheet are always equal.

Answer 2

It means that every transaction has dual (i.e., two) aspects one is debit and another is credit. For example, if you purchase goods worth ₹ 10,000 for cash, one aspect is the goods and another is the cash. So one account will be debited and another account will be credited with the same amount. This is also called the double entry system. It is the foundation of accounting. It is because of this principle that the two sides of the trial balance are always equal and both sides of the balance sheet tally.
Assets = liabilities + capital.