Basic Accounting Principles

Basic accounting principles are accounting standards that have been generally accepted and have pervasive impact on the form and content of financial statements.

Duality

Duality is the basic characteristics of accounting transaction which is embodied in double entry system. The claims against assets of a business are by the creditors and the owners. Therefore, at any point of time, the total assets of a business are equal to its total liabilities.  Liabilities to outsiders are known as liabilities, but liability to the owners in accounting is referred as capital.

This concept expresses the relationship that exists among assets, liabilities and the capital, in the form of an accounting equation which is expressed in the following simplest form as

ASSETS – LIABILITES = CAPITAL

OR

ASSETS = LIABILITES + CAPITAL