Use duality and the accounting equation
Record both effects of a transaction and check that assets equal liabilities plus equity.
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These lessons cover Topic 1.2 only. The 2029 syllabus has a separate document and is not mapped here. Practice is self-checked, not an official Cambridge grade; timed-paper practice and human subject-teacher review remain outstanding.
Before you begin
- Topic 1.1 introduces business forms and finance. In these lessons, keep each transaction tied to its source evidence and record both sides of its effect.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What does duality require in a complete double-entry record?
What you will learn
- State the accounting equation
- Use debit and credit to record two equal effects
- Explain why a balanced trial balance cannot detect every error
The equation describes claims on resources
Assets = liabilities + equity. Assets are resources controlled by the business; liabilities are claims from outsiders; equity is the residual claim. The equation is a way to describe the position, not a measure of cash or profit.
Duality means each transaction has two-sided effects. A complete double-entry record uses equal total debits and credits. For example, borrowing increases cash and liabilities by the same amount.
Debit and credit name account sides
Assets and expenses normally increase by a debit; liabilities, equity and income normally increase by a credit. A decrease is recorded on the opposite side. Debit does not simply mean money received, and credit does not mean money paid.
A trial balance compares ledger debit and credit totals. Equality is a useful arithmetic check, but an omitted transaction or a balanced entry in the wrong accounts may leave the totals equal.
Pause and explain
Why might an omitted transaction leave a trial balance equal?
Worked example
A business buys equipment for $2,400 on credit. Show the double entry and explain the immediate equation effect.
Show the worked solution
- Equipment is an asset and increases: debit Equipment $2,400.
- The business now owes the supplier: credit Payables $2,400.
- Assets and liabilities both rise by $2,400, so the equation remains balanced.
Answer Debit Equipment $2,400; credit Payables $2,400. Assets rise by $2,400 and liabilities rise by $2,400; equity is unchanged at the transaction date.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A shop receives $3,000 cash from a bank loan. State the entries and the effect on the equation.
Give me a hint
Identify the resource received and the lender's claim.
Compare my reasoning
- Cash is an asset and increases: debit Bank $3,000.
- The loan is a liability and increases: credit Loan $3,000.
- Both assets and liabilities rise by $3,000; equity is unchanged.
Debit Bank $3,000; credit Loan $3,000. Assets and liabilities each rise by $3,000.
Look for these in your work
- Debit side correct
- Credit side correct
- Equation effect checked
A business pays $450 rent by bank transfer. Record the entries and explain the effects on profit and cash.
Give me a hint
Rent is an expense; bank is an asset.
Compare my reasoning
- Debit Rent expense $450 because the expense increases.
- Credit Bank $450 because the asset decreases.
- Profit falls by $450 before tax under the stated simple transaction; cash falls by $450.
Debit Rent expense $450; credit Bank $450. The expense reduces the period's profit and the bank balance falls by $450.
Look for these in your work
- Expense entry correct
- Asset entry correct
- Profit and cash effects distinguished
An assistant says a trial balance proves that the accounts contain no errors because its totals agree. Give a counterexample.
Give me a hint
Think of errors that affect both debit and credit equally or leave both out.
Compare my reasoning
- A $600 credit purchase could be omitted entirely.
- Neither a debit nor a credit would enter the ledger.
- The trial balance could still agree despite incomplete records.
If a $600 transaction is omitted from both sides, debit and credit totals remain equal even though the accounts are incomplete. Agreement is not proof that every transaction is present or correctly classified.
Look for these in your work
- Valid error identified
- Effect on both sides explained
- Limit stated
Common mistakes
- Recording only one side of a transaction
- Treating every credit as cash paid
- Assuming a balanced trial balance proves all entries are correct
What can you explain now?
A business receives a $500 bank loan. Which two balances rise?
Compare with the explanation
Cash and liabilities
The cash asset and the obligation to repay both increase.
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Make it stick
Write the accounting equation and state what a debit and credit mean.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.