Commercial Applications
"Every transaction has two effects." (with reference to the concept of Accounting). Give a reason either for or against.
GAAP
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Answer
FOR — The statement is correct and is based on the Dual Aspect Principle of accounting.
Reason — According to the Dual Aspect Principle, every business transaction has a double (two-fold) effect on the business — there must be a giver of benefit and an equal receiver of the same. For example, if X purchases a car for ₹3,00,000 in cash, one account (Car A/c) is debited and another account (Cash A/c) is credited with the same amount. This principle gave rise to the Double Entry System of book-keeping. It is because of this principle that the accounting equation Assets = Liabilities + Capital always holds true and both sides of the Balance Sheet are always equal.
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