This is because every item involved in the accounting equation forms a part of the balance sheet.
#Double entry finance app for windows 10 plus
Therefore, the dual effect of every business transaction impact in such a way that the asset side equals the liability plus capital side of the equation.įurthermore, this equation is also known as balance sheet equation. Whereas, the claim of lenders or outsiders on the business is called liability or outsider’s equity. Such stakeholders include business owners and lenders (outsiders) who provide funds to the business.įurthermore, the claim of owners on a business is called capital or owner’s equity. These are the stakeholders who have provided funds for such resources. This means that at any given point of time, the resources of a business are always equal to the claims of the stakeholders. This accounting equation shows that assets of a business always equate the claims of owners and outsiders. The principle of duality is expressed in the form of the fundamental accounting equation. Principle of duality further is the basis of double entry system of accounting. This effect is the basis of all business transactions and is known as the principle of duality. Thus, as can be seen, every transaction involves give and take effect. At the same time, increase liabilities (creditors) by Rs 45,00,000.Increase the asset (plant and machinery) by Rs 45,00,000.
The effect of this transaction is as follows: Still further, Rajveer purchases machinery worth Rs 45,00,000 on credit from Kapoor Pvt Ltd. At the same time, reduce another asset (cash) by Rs 5,00,000.Increase the asset (stock of goods) by Rs 5,00,000.
At the same time, increase capital by Rs 10,00,000įurther, Rajveer purchases goods amounting to Rs 5,00,000 on cash.Increase assets (cash) of the business by Rs 10,00,000.The amount invested by Rajveer will affect the business in following way taking the above business transaction into consideration: Rajveer started a business by investing Rs 10,00,000. Hence, it is first important to understand the Dual Aspect Concept in order to understand the double accounting system. Thus, this system of accounting is based on the Dual Aspect Concept of accounting. In other words, every business transaction has an equal and opposite effect in minimum two different accounts. Double Entry System of Accounting means every business transaction involves at least two accounts.
0 kommentar(er)
