Question

Sales of office furniture has been credited to Sales Account. It is :

• A. A Clerical error
• B. An error of principle
• C. An error of omission
• D. Compensating error

Answer 1

The correct option is B An error of principle

Sale of office furniture is a capital profit or capital income, it cannot be entered as normal sale. Error of principle is when basic accounting principle is not followed. There is no distinction between capital and revenue items. Here capital income is treated as revenue income. This error has no effect on the agreement of the trial balance as the right amount is debited or credited though to the wrong account but the net effect is the same.