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What is Dual Aspect Concept in accounting ?

The Dual Aspect Concept : Dual Aspect Concept, also known as Duality Principle, is a fundamental convention of accounting that necessitates the recognition of all aspects of an accounting transaction. Dual aspect concept is the underlying basis for double entry accounting system. Explanation In a single entry system, only one aspect of a transaction is recognized. For instance, if a sale is made to a customer, only sales revenue will be recorded. However, the other side of the transaction relating to the receipt of cash or the grant of credit to the customer is not recognized. Single entry accounting system has been superseded by double entry accounting. You may still find limited use of single entry accounting system by individuals and small organizations that keep an informal record of receipts and payments. Double entry accounting system is based on the duality principle and was devised to account for all aspects of a transaction. Under the system, aspects of tran...
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What is Dual Aspect Concept in accounting ?

The Dual Aspect Concept :

Dual Aspect Concept, also known as Duality Principle, is a fundamental convention of accounting that necessitates the recognition of all aspects of an accounting transaction. Dual aspect concept is the underlying basis for double entry accounting system.

Explanation
In a single entry system, only one aspect of a transaction is recognized. For instance, if a sale is made to a customer, only sales revenue will be recorded. However, the other side of the transaction relating to the receipt of cash or the grant of credit to the customer is not recognized.

Single entry accounting system has been superseded by double entry accounting. You may still find limited use of single entry accounting system by individuals and small organizations that keep an informal record of receipts and payments.

Double entry accounting system is based on the duality principle and was devised to account for all aspects of a transaction. Under the system, aspects of transactions are classified under two main types:

Debit
Credit
Debit is the portion of transaction that accounts for the increase in assets and expenses, and the decrease in liabilities, equity and income.

Credit is the portion of transaction that accounts for the increase in income, liabilities and equity, and the decrease in assets and expenses.

The classification of debit and credit effects is structured in such a way that for each debit there is a corresponding credit and vice versa. Hence, every transaction will have 'dual' effects (i.e. debit effects and credit effects).

The application of duality principle therefore ensures that all aspects of a transaction are accounted for in the financial statements.



 
Example
Mr. A, who owns and operates a bookstore, has identified the following transactions for the month of January that need to be accounted for in the monthly financial statements:

                                                                                                              $
1. Payment of salary to staff                                                           2,000
2. Sale of books for cash                                                           5,000
3. Sales of books on credit                                                         15,000
4. Receipts from credit customers                                                 10,000
5. Purchase of books for cash                                                         20,000
6. Utility expenses - unpaid                                                           3,000


Under double entry system, the above transactions will be accounted for as follows:

Account Title                                        Effect                              Debit                            Credit
1. Salary Expense                         Increase in expense               2,000
    Cash at bank                               Decrease in assets                                              2,000
2. Cash in hand                         Increase in assets               5,000
    Sales revenue                         Increase in income                                              5,000
3. Receivables                              Increase in assets             15,000
    Sales revenue                        Decrease in income                                            15,000
4. Cash at bank                         Increase in asset             10,000
     Receivables                         Decrease in asset                                            10,000
5. Purchases                                Increase in expense              20,000
    Cash at bank                         Decrease in asset                                            20,000
6. Utility Expense                    Increase in expense               3,000
    Accrued expenses                 Decrease in asset                                              3,000

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