Explain the effects of the transactions on Accounting Equation under a Financial Accounting System.
Ans. Under the Double Entry System each of the financial transaction bring the dual effect on accounting system in form of Debit and Credit for example a company’s capital is Rs. 1 Lakh and it purchases of goods for Rs. 50000 and the same has not be sold yet so it will be considered as Stock and stock comes under Assets so this transaction will reduce the capital by Rs. 50000 and capital shall remain only Rs. 50000 and the Assts at other side will be 50000 so the capital reduces and Assets increases mean the dual aspect effects comes therein.