Commercial Applications
With reference to the Dual Aspect Principle identify the correct option:
- Assets = Capital - Liabilities
- Liabilities = Assets + Capital
- Capital = Assets + Liabilities
- Capital = Assets - Liabilities
GAAP
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Answer
Capital = Assets - Liabilities
Reason — The Dual Aspect Principle gives rise to the accounting equation: Assets = Liabilities + Capital. Rearranging this equation gives Capital = Assets − Liabilities. This equation always holds true at any point of time and ensures that both sides of the Balance Sheet are always equal.
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