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 Accounting equation is based on dual aspect concept. Every transaction has a two sided effect, that is each transaction is debited and credited. For instance, the owner of a business invests capital, to start the business, say,  Rs. 50,000. By this, the cash would come in , which is an asset , and is to be debited. On the other hand, the capital is a liability of Rs. 50,000 and it has to be credited.