Question

Purchase of office furniture worth Rs. 20,000 has been debited to the General Expenses account. It is

• A. A clerical error
• B. An error of principle
• C. An error of omission
• D. An error of commission

Answer 1

The correct option is B An error of principle

Error of principle is when the basic principle of accounting is not followed. In this there is no distinction between capital and revenue items. Such errors do not affect the agreement of the trial balance because the accounting treatment is correct only the principle of accounting is not followed.

In the case, furniture is an asset and expenditure on it is classified as capital expenditure and is transferred to the balance sheet. General expense is revenue expenditure and is charged to the profit and loss account. Trial balance will not be affected in this error.