Question

Purchase of office furniture worth $Rs.2500$ has been debited to general expense account. It is ___________.

• A. an error of omission
• B. a clerical error
• C. an error of principle
• D. a compensating error

Answer 1

Answer: (C)

an error of principle

Purchase of office furniture has to be debited to furniture account as its an asset. This has been debited as general expenses. Its an error of principle as capital expenditure is debited as revenue expenditure.

Rectification entry will be as under:

Furniture A/c Dr. 2500

To General Expenses 2500