Page 27 - CA_ELG_Volume I_ELG-Sample

Paper 1 Principles and Practices of Accounting Theoretical Framework 1.17

1.12.8 Realisation Concept

Any change in value of an asset has to be recorded only when the business realises it.
However, a more conservative path is followed by accountants. They do not cover any
probabale gain but try to cover all probable losses. That is to say, if accountants antic-
ipate decrease in value, they account for it, but if there is increase in value they ignore
it until it is realised.
However, now-a-days, revaluation of assets has become a widely accepted practice
when the value change is of permanent nature. Accountants adjust the change in value
through creation of revaluation reserve.

1.12.9 Dual Aspect Concept

This concept is the core of double entry book-keeping. Every event or transaction has
two aspects.

Increase in Asset = Decrease in Asset ¯ / Increase in Liability ¯
¯
Decrease in Asset ¯ = Increase in Asset / Decrease in Liability ¯
¯
Increase in Liability = Increase in Asset / Decrease in Liability ¯
¯
¯
Decrease in Liability ¯ = Decrease in Asset ¯ / Increase in Liability ¯

= Asset
Asset Liability

= Asset

Asset Liability

= Liability
Liability Asset

= Liability

Liability Asset

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