What is Accounting Based on?
Accounting is based on the double entry principle. This principle states that for every credit entry there must be a corresponding debit entry. This means that everything must balance out.Think of an account having two sides, the debit and the credit. Using an Example, if a bank gave me loan of £1,000. I will Debit my Bank account with £1,000 and credit my loan account because it is a liability with £1,000. Therefore it balances out. Always think of it like this:DEBIT -Assets and expensesCREDIT- Liabilities and income
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Toyosi paid £6,600 for insurance during the year ended 31/03/2014. The "insurance prepaid" account showed a balance of £390 as at 01/04/2013 and a balance of £450 as at 31/03/2014. Calculate the insurance expense for the year ended 31/03/2014.