Discuss Dual aspect Concept.



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With reference to proper illustration, Discuss Dual aspect concept.

2 Answer(s)


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Dual Aspect Concept, also known as Duality Principle, is a fundamental convention of accounting that necessitates the recognition of all aspects of an accounting transaction. Dual aspect concept is the underlying basis for double entry accounting system.

Example
Mr. A, who owns and operates a bookstore, has identified the following transactions for the month of January that need to be accounted for in the monthly financial statements:
$
1. Payment of salary to staff 2,000
2. Sale of books for cash 5,000
3. Sales of books on credit 15,000
4. Receipts from credit customers 10,000
5. Purchase of books for cash 20,000
6. Utility expenses - unpaid 3,000
Under double entry system, the above transactions will be accounted for as follows:
Account Title Effect Debit Credit
$ $
1. Salary Expense Increase in expense 2,000
Cash at bank Decrease in assets 2,000
2. Cash in hand Increase in assets 5,000
Sales revenue Increase in income 5,000
3. Receivables Increase in assets 15,000
Sales revenue Decrease in income 15,000
4. Cash at bank Increase in asset 10,000
Receivables Decrease in asset 10,000
5. Purchases Increase in expense 20,000
Cash at bank Decrease in asset 20,000
6. Utility Expense Increase in expense 3,000
Accrued expenses Decrease in asset 3,000

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Dual aspect is a basic principal of accounting according to which each & every accounting transaction will have two effects one on the debit side and other on the credit side. For example you pay salary in cash to Mr. Ram of Rs. 15,000/-, now the accounting treatment according to the double entry system would be to Debit(Dr.) Salary by Rs. 15,000/- which will appear under the head "Salaries & wages" in the Profit & loss A/c and a corresponding credit(Cr.) the the cash A/c by Rs. 15,000/- which will reduce your cash in hand by Rs. 15,000/- thereby affecting your balance sheet.

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