Dual aspect term in Accounting ?

This is the only format that auditors will accept if they are to issue opinions on financial statements.

Income (profit) earned by the business during a period is compared with the expenditure incurred  to earn the revenue.

10. Realization Concept:

According to this concept profit, should be accounted for only when it is actually realized. Revenue is recognized only when sale is affected or the services are rendered. However, in order to recognize revenue,

receipt of cash us not essential. Even credit sale results in realization as it creates a definite asset called “Account Receivable”.

However there are certain exception to the concept like in case of contract accounts, hire purchase etc. Similarly incomes like commission interest rent etc.

are shown in Profit and Loss A/c on accrual basis though they may not be realized in cash on the date of preparing accounts.

The economic resources of an entity or organisation is known as assets.

11. Verifiable Objective Evidence Concept:

And the claims of various parties against these assets is known as equities. There are two types of equities which are as follows –

According to this concept all accounting transactions should be evidenced and supported by objective documents. These documents include invoices, contract, correspondence, vouchers, bills, passbooks, cheque etc.

Well, in all the assets of the business, there is claim of someone either it is of owner or creditors.

The important thing to note is that these claims should not exceed the amount of assets to be claimed, it follows that

This is fundamental accounting equations expressed in its general form

This is the formal expression of the dual aspect concept.

Most of the accounting procedures are derived from this equation.

In order to reflect the two different types of equities, the equation becomes

Events that affect the accounting records are known as transactions.

Every transaction has dual impact on the accounting records .....

Accounting records both the aspects of the transaction. Hence accounting is known as dual- entry system.

Ram starts a business and his first act is to open a bank account in which he deposits Rs. 1,00,000 of his own money

The dual aspect of this transaction is that the business now has an asset that is cash of Rs. 1,00,000. The second aspect of the transaction is that Ram has a claim of Rs. 1,00,000 against the assets of the business. In other words,

Now suppose business borrows 50,000 from bank. The business accounting record will change in two ways –

A new claim of creditor that is bank will be there.

is the correct answer . Accounting transactions to be capable to measure in the money values See More
Answers (13)