What is Dual Aspect Concept? Explanation with Example

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What is Dual Aspect Concept?

Dual Aspect Concept – This accounting concept states that there are two aspects of each and every transaction that is debit and credit of equal amount.

The economic resources of an entity or organisation is known as assets. And the claims of various parties against these assets is known as equities. There are two types of equities which are as follows –

  • Liabilities are the claims of creditors.
  • Owner’s Equity is the claims of the owners of the business.

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

  Assets = Equities

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 –

Assets = Liabilities + Owner’s Equity

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.

Example of Dual Aspect Concept

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,

Assets (Cash = 1,00,000) = Equities (Owner’s = 1,00,000)

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

  1. There is increase in cash by 50,000. Meaning thereby, the assets of the business will increase.
  2. A new claim of creditor that is bank will be there.

Assets (Cash = 50,000) = Liabilities (50,000)


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