Page 28 - CA_ELG_Volume I_ELG-Sample

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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