There must be a double entry to complete any financial transaction, means debit should be always equal to credit. Hence, every financial transaction has its dual aspect:
● we get some benefit, and
● we pay some benefit.
For example, if we buy some stock, then it will have two effects:
● the value of stock will increase (get benefit for the same amount), and
● it will increase our liability in the form of creditors.
|Purchase of Stock for Rs 25,000||Stock will increase by Rs 25,000 (Increase in debit balance)Cash will decrease by Rs 25,000 (Decrease in debit balance)orCreditor will increase by Rs 25,000 (Increase in credit balance)|