Question

Select the most appropriate alternatives from those given below and rewrite the sentence.

Wages paid for installation of machinery wrongly debited to wages account is an error of ________.
a) omission
b) principle
c) commission
d) duplication

Answer 1

Wages paid for installation of machinery wrongly debited to wages account is an error of principle.

Explanation:
Wages paid for installation of machinery is capital expenditure and should be added to the cost of the asset. Hence, it should be debited to the Machinery A/c. Instead, it has been wrongly debited to the Wages A/c, i.e. it is treated as revenue expenditure. Thus, it is an error of principle, which means capital expenditure is treated as revenue expenditure or vice versa.