Question

A sale of office furniture credited to Sales Account :

• A. is an error of omission
• B. will affect the trial balance
• C. will not affect the profit
• D. None of these

Answer 1

Answer: (D)

None of these

When furniture is sold it is credited to the furniture account as it not the main purpose of the business so it cannot be categorised as normal sales. Sale of furniture is a capital income. When sale of furniture is credited to sales account, this is known as error of principle. Error of principle is when basic principle of accounting is not followed, here no distinction is made between capital and revenue items.

This error will not affect the trial balance because though the transaction is recorded in the wrong account, but the accounting treatment is correct i.e., instead of furniture account sales account is credited. The net effect of this error is not observed.

This will affect the profit because capital income and capital expense are not included in the profit and loss account. Thus when such income is treated as revenue incomes and added to the profit and loss account, the profit will be affected.