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1.18   Theoretical Framework                      Principles and Practices of Accounting  Paper       1







                      TIPS & TRICKS Dual Aspect Concept


                Equity + Long Term Liabilities + Current Liabilities = Fixed Assets + Current Assets
                   ƒ Equity  + Long Term Liabilities  = Fixed  Assets  + (Current  Assets – Current
                      TIPS & TRICKS
                   Liabilities)

                   ƒ Equity = Fixed Assets + Working Capital - Long Term Liabilities




             Figures 1.6 and 1.7 illustrate the dual aspect concept wherein the two-fold effect has
             been emphasised.

               As depicted in the figure, assume Mr Deepak has purchased an asset. This will result
             in an increase in asset. This will result in two aspects.

                ƒ The purchase of asset on credit will result in an increase in liability.

                ƒ The purchase of asset in cash will result in a decrease in asset.

             Assume Mr Deepak sells an asset. This will result in a decrease in asset. This will result
             in two aspects.









                                                   Mr Deepak









                          Purchases an Asset                                Sells an Asset
                           (Increase in Asset)                          (Decrease in Asset)








                                                                         To a
                                                                     Customer
                        On Credit          In Cash                                       In Cash
                        (Increase        (Decrease                     whom             (Increase
                       in Liability)      in Asset)                   He Owes           in Asset)
                                                                     (Decrease
                                                                     in Liability)



                                              Fig. 1.6 Increase in Asset




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