Dual Aspect Concept Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

dual aspect dual aspect this is the
fundamental double-entry concept every
transaction has two sales basically it
says assets are equal to liabilities in
accounting assets will always be equal
to liability liability includes
liability may be of two types may be
liability to owner and liability to
third party to some outsider liability
to the owner is often got liquid
it's called equity that is the owners
share so sometimes the the equation may
be written as assets equal to
liabilities plus equity or equity what
is equity what belongs to the owner what
belongs to the owner asset - liability
that is the worth of the business that
is what belongs to the so the
fundamental accounting equation is that
assets an equal doe or sorry equity is
equal to assets - liability or assets
equal to liability plus equity
so this is a fundamental accounting
equation on the basis of which the
entire double-entry system is list we
can consider a couple of examples to see
whether assets are always equal to
liabilities let us say X starts a
business with ten thousand sorry ten
lakh rupees he opens a bank account
deficit seven lakh 50 tons buys
furniture for Dula issues a check he
arranges for fittings in his shop for
fifteen terms let us take each of these
from
actions we shall put assets on one side
should be equal to and putting
liabilities and duty so assets are equal
to liabilities plus et first thing is
that X starts of business the 10 let's
remember the entity concept says that X
is a separate person the business is a
separate person so X brings money X
brings money it is actually called
capital in the books so what happens
there will be a cash of 10 lakhs so this
is cash 10 X and capital of 10 lakhs and
capital of 10 lakhs
so if you notice cash 10 lakhs
Capital 10 lakhs so now we have a set of
10 lakh in cash and we have liability or
other equity of then like being capital
next she opens a bank account deficit 7
lakh 50,000 in the back so now what
happens his cash has come down - - like
50 - 7 lakh 50 am sorry but 7 lakh 50000
is given to the bank bank money in the
bank is also his asset if tomorrow he
wants to take this money he can take it
back the bank has to give it to him
therefore 7 left 50 thousand is an asset
so what happens is deposits when he
deposits cash when he deficits cash
deposits in bank 10 lakh
+7 like 50,000 -7 like 50,000 because
cash goes down comes down by 7 lakh 50
and cash in bank goes up by 7 lakh 50 so
+ bank - cash
7 like 50 the equation stands next he
buys furniture for 2 lakh and issues a
check
he buys furniture so when furniture
comes in what happens for nature plus 2
lakh issues a chain so money goes out
from the bank again I said comes down
bank as it comes down furniture as it
goes up by 2 lat net effect name so we
still have 10 lakh of acid and 10 lack
of equity but the nature of the essence
has changed he arranges for fittings in
his shop fifty thousand arranges for
fittings in his shop for fifty thousand
let us assume this arranging of fifty
thousand is on credit he has not yet
paid the person in that case what
happens he has a fittings another asset
of fifty thousand and a liability of
fifty terms at the end of this if we
take an equation
what we have is a set of 10 lakh fifty
thousand how do we have 10 like fifty
thousand we started with cash of 10 lakh
but 7 lakh fifty thousand was paid into
the bank so we have a cache of only two
like fifty thousand consisting of cash -
like fifty thousand consisting of
balance in Bank seven like fifty - the
two lack of five
50-plus for nature of two lengths this
is our asset cash to like fifty cash to
like fifty bank five lakh 54 nature
tulip then we have on the liability side
this should be equal to liabilities I'd
fifty thousand what is this creditor for
fittings because we've not yet paid this
person who is provided fittings and ten
lakh capita equally the Africa thus
every transaction had a dual aspect if
an asset goes up a liability also goes
up or an asset goes up and the liability
comes down as it goes up equity Costa
asset goes up liability goes up
thus double entry is satisfied let us
consider one more example buy goods from
Y on credit to luck sell all the goods
for two like fifty thousand and debit
deposits the check into the bank now he
buys goods on credit for two so what
happens is there is an asset for two
like an either side there is a liability
because he has not paid the creditor its
own credit student Michaels from why
this is actually wise account this is
goods account for two lakh then he sells
all the goods for two like fifty
thousand and deposits the check into the
fact therefore this goods worth two lakh
goes out goes out and money comes in for
two lakh fifty thousand but now there is
a difference of fifty thousand what is
this difference of 15 thousand this
difference of fifty thousand is nothing
but the profit made by the business
because the business bought goods for
Tula and it's sold for to like $50
profit of the business belongs to whom
the profit of the business belongs to
the proprietor equity so when profit is
made it is transferred to the transfer
to the proprietorship
so as a result of these transactions we
have now a bank balance a set of tool at
fifty thousand we have a liability to a
creditor for two land and capital
liability to the owner which is capital
or equity of fifty thousand again the
double-entry dual aspect is satisfied so
sometimes this s this equation is
written as assets equal to liability
plus capital plus income minus expense
so if there is an income it is added to
capital if there is an expense it is
deducted from capital when we go on to
understand accounting entries this is
the basic foundation on which all the
accounting entries would be freaked so
every transaction has a dual side the
basic equation is that I said is equal
to liability plus equity or equity is
nothing but what belongs to the owner it
is nothing but assets minus liabilities