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Define Dual aspect concept in accounting?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 rakkesh asked over 2 years ago

Hi, Explain about Dual aspect concept in accounting?

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6 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Surbhi answered about 2 years ago

Hi, 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.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered over 2 years ago

If an organization were not to observe the dual aspect concept, it would use single-entry accounting, which is essentially a checkbook. A checkbook cannot be used to derive a balance sheet, so an entity would be limited to the construction of a cash-basis income statement.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

Issue an invoice to a customer. One part of the entry increases sales, which appears in the income statement, while the offset to the entry increases the accounts receivable asset in the balance sheet. In addition, the change in income triggered by the increase in sales appears in retained earnings, which is part of the equity section of the balance sheet. Receive an invoice from a supplier. One part of the entry increases an expense or an asset account, which can appear in either the income statement (for an expense) or in the balance sheet (for an asset). The offset to the entry increases the accounts payable liability in the balance sheet. In addition, the change in income triggered by the recordation of an expense appears in retained earnings, which is part of the equity section of the balance sheet.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

> Dual aspect concept in accounting **--1. Definition** 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. Contents: Definition Explanation Example **2. Explanation** In a single entry system, only one aspect of a transaction is recognized. For instance, if a sale is made to a customer, only sales revenue will be recorded. However, the other side of the transaction relating to the receipt of cash or the grant of credit to the customer is not recognized. Single entry accounting system has been superseded by double entry accounting. You may still find limited use of single entry accounting system by individuals and small organizations that keep an informal record of receipts and payments. Double entry accounting system is based on the duality principle and was devised to account for all aspects of a transaction. Under the system, aspects of transactions are classified under two main types: **Debit Credit** Debit is the portion of transaction that accounts for the increase in assets and expenses, and the decrease in liabilities, equity and income. Credit is the portion of transaction that accounts for the increase in income, liabilities and equity, and the decrease in assets and expenses. The classification of debit and credit effects is structured in such a way that for each debit there is a corresponding credit and vice versa. Hence, every transaction will have 'dual' effects (i.e. debit effects and credit effects). The application of duality principle therefore ensures that all aspects of a transaction are accounted for in the financial statements.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

The accounting equation is made visible in the balance sheet, where the total amount of assets listed must equal the total of all liabilities and equity. One part of most business transactions will have an impact in some way on the balance sheet, so at least one part of every transaction will involve either assets, liabilities, or equity. Here are several examples: Issue an invoice to a customer. One part of the entry increases sales, which appears in the income statement, while the offset to the entry increases the accounts receivable asset in the balance sheet. In addition, the change in income triggered by the increase in sales appears in retained earnings, which is part of the equity section of the balance sheet.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 jitendra etikala answered over 2 years ago

The dual aspect concept states that every business transaction requires recordation in two different accounts. This concept is the basis of double entry accounting, which is required by all accounting frameworks in order to produce reliable financial statements. The concept is derived from the accounting equation, which states that: Assets = Liabilities + Equity The accounting equation is made visible in the balance sheet, where the total amount of assets listed must equal the total of all liabilities and equity. One part of most business transactions will have an impact in some way on the balance sheet, so at least one part of every transaction will involve either assets, liabilities, or equity. Here are several examples: Issue an invoice to a customer. One part of the entry increases sales, which appears in the income statement, while the offset to the entry increases the accounts receivable asset in the balance sheet. In addition, the change in income triggered by the increase in sales appears in retained earnings, which is part of the equity section of the balance sheet. Receive an invoice from a supplier. One part of the entry increases an expense or an asset account, which can appear in either the income statement (for an expense) or in the balance sheet (for an asset). The offset to the entry increases the accounts payable liability in the balance sheet. In addition, the change in income triggered by the recordation of an expense appears in retained earnings, which is part of the equity section of the balance sheet. If an organization were not to observe the dual aspect concept, it would use single-entry accounting, which is essentially a checkbook. A checkbook cannot be used to derive a balance sheet, so an entity would be limited to the construction of a cash-basis income statement. If management wants to have its financials audited, it must accept the dual aspect concept and maintain its accounting records using double-entry accounting. This is the only format that auditors will accept if they are to issue opinions on financial statements.

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