duality

7.1 Accounting Principles – Duality

What is Duality?

Duality is the idea that every financial transaction has two sides – a debit and a credit. Think of it like a seesaw: if one side goes up, the other must go down. In accounting, this keeps the books balanced.

Why It Matters

• Ensures the accounting equation $\text{Assets} = \text{Liabilities} + \text{Equity}$ always holds.
• Helps detect errors – if debits don’t equal credits, something’s wrong.
• Provides a clear record of how money moves in and out of a business.

Analogy: The Money Flow River

Imagine a river that splits into two streams when it flows through a town. One stream (debit) represents money entering the business (like sales or loans). The other stream (credit) represents money leaving (like expenses or repayments). The total water volume stays the same, just split differently.

Example Transaction

Company BrightTech buys a computer for £800 in cash.

1. Debit Equipment £800 – we’re adding an asset.
2. Credit Cash £800 – we’re reducing an asset.

Resulting journal entry:

Key Points to Remember

• Debits increase asset and expense accounts, decrease liability, equity, and revenue accounts.
• Credits do the opposite.
• Every entry must have at least one debit and one credit of equal amount.

Practice Question

BrightTech pays £200 for office supplies on credit.

1. What accounts are affected?
2. Write the correct journal entry.

Answer:

• Accounts affected: Office Supplies (asset) and Accounts Payable (liability).
• Journal entry:

  Account	Debit (£)	Credit (£)
  Office Supplies	200
  Accounts Payable		200