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11 Class Accountancy Rules for Accounting Equations An Accounting Equation  represents the relationship between assets and liabilities of the firm, showing total assets of the firm is equal to the total liabilities and owner’s capital/equity.An Accounting equation is based on the dual aspect concept of accounting. Every transaction has two aspects-debt and credit and affects either both the sides of the equation or one side of the equation only with equal amounts. Transactions from the accounting equation viewpoint can be divided into two, i.e., Transactions affecting two items Increase in the asset, increase in the liability Decrease in the liability, decrease in the asset. Increase in the asset, increase in the owner’s equity Decrease in the owner’s capital, decrease in the asset.   Transactions affecting the same side but in opposite direction are: Increase in asset, decrease in another asset Decrease in liability, increase in another liability ...