3.1 The essential concepts behind double-entry accounting
Three concepts of accounting form the basis of the double-entry bookkeeping system of recording transactions and preparing financial accounts:
The business entity concept:
The business entity concept states that a business is separate from the owner(s) of the business. You were introduced to this concept in Week 1.
The accounting equation:
The accounting equation, for any business, states: Assets = Capital + Liabilities. You were introduced to the equation in Week 2.
The duality concept:
The duality concept means that every transaction has two effects. This is a core concept you will learn about this week.