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Accounting's fundamental principle stipulates that every financial transaction should have at least two effects on the accounting equation. This basic notion gives birth to the accounting concept of the dual effect. According to the accounting equation, the asset total must equal the liability total plus the equity total. The equation depicts the critical relationship that exists between a corporation's resources, its obligations, and the rights that shareholders have on those resources. One example would be the procedure by which a company secures a loan from a financial institution in order to borrow a certain amount of money. The value of the company's assets has grown since you got cash from the bank. The duty would arise from the requirement to make payments on the amount of money acquired from the bank. As a result, when the cash flow increased, so did the debt. The accounting equation must always be in an equilibrium state, and the dual effect principles give a systematic technique for documenting and monitoring the impact of a company's financial actions on its overall financial position.