Question

Purchase of office furniture for $Rs.6000$ has been debited to General Expenses.Account. Its is

• A. An error commission
• B. An error of omission
• C. An error of principle
• D. None of these

Answer 1

Answer: (C)

An error of principle

When the fundamental principle of accounting is violated while preparing the accounts, this is known as error of principle. These errors are made when there’s no proper distinction between capital and revenue items i.e., capital expenditure being treated as revenue expenditure and vice versa.

Amount spent on acquiring fixed assets such as office furniture is known as capital expenditure and this is debited to the furniture account as it is a fixed asset and it is used for a number of years and so its expenses is distributed.

General expenses are those the effect of which is observed in the current year only and it is deducted from the profit of the year.