In each accounting transaction, minimum two aspects or two accounting matters are concerned. The two aspects or effects are the debit effect and the credit effect. One effect is receiving of benefit which is debited and the other effect is giving of benefit which is credited. This way the total of the debit and credit balances is equal. In other words, each receiver is the giver and each giver is the receiver, e.g., Anish purchased goods worth ₹ 3,000 on cash from Raj Traders. In this transaction, Anish receives the goods and gives the money, whereas Raj Traders gives the goods and receives the money. This way there is a credit effect in one or more accounts, of equal amount having a debit effect in one or more accounts. As a result, the total of debit balances is equal to the total of credit balances.

On this basis, a simple equation is prepared which is C + L = A. If the funds invested by the owner in the business is known as ‘C’ (Capital), the amount invested by third parties in business is known as X (Liabilities) and Assets are known as A’, then the equation indicates that, on the assets of the business, there is a right of the owners and creditors (liabilities). The assets in the business will be equal to the funds invested in the business by the owner of the business and creditors.

Then the following equation is available :
C + L = A
Change on one side of this equation brings the same and the similar change on the other side of the equation. As per the dual aspect, if there is change in stock or assets due to an opposite effect in some other asset then there is no change in the total assets of the business. If any asset is purchased on credit, then there is an increase in the assets, and similarly, there is also an increase in the liabilities by the same amount. When capital is invested in the business, there is an increase in the assets as well as in the capital of the business.