What Must Be Done If A Transaction Increases Or Decreases The Left Side Of The Accounting Equation
This is due to Dual Aspect Concept which states that for every debit, there must be a credit with an equal amount. Examples of such transactions include initial or additional investment made by owner of the business, expenses paid for cash, paid to Suppliers for goods purchased on account, withdrawal of owner from the business for his own personal use, etc. All of these examples either show the increase of the debit side or the decrease of the left side or assets side of the accounting equation but at the same time these examples also show the increase or decrease of the right side whichever is the case, i.e., if the left side is increased, then the right side of the accounting equation must also be increased (e.g., made initial investment, expenses paid, etc.) and if the left side is decreased, then the right side of the accounting equation should also be decreased (e.g., paid to suppliers, withdrew cash for personal use of the owner, etc.).
Example Of Increase In The Left Side (Assets Side) Of The Accounting Equation
If a sole proprietor, Mr. A made an initial investment of Rs. 50000 to start his own business, then the left side of the accounting equation is increased by Rs. 50000 and the right side is also increased by Rs. 50000.
Example Of Decrease In The Left Side (Assets Side) Of The Accounting Equation
If a sole owner, Mr. A withdrew Rs. 5000 from his business for his own personal use, then the left side of the accounting equation is decreased by Rs. 5000 and at the same time, the right side is also decreased by Rs. 5000.
So, we can say that any increase in the left side of the accounting equation increases the right side of the accounting equation with an equal amount and any decrease in the left side of the accounting equation decreases the right side of the accounting equation with an equal amount due to Dual Aspect Concept.
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