Which of the following errors is an Error of Principle?
Answer and explanation
Correct answer: D. Treating the construction of a factory shed extension as repairs expense
- Step 1: Define an error of principle. It occurs when fundamental accounting principles (such as capital vs revenue allocation) are violated.
- Step 2: Charging capital expenditure (shed construction) to revenue expense (repairs) violates this fundamental canon.
- Step 3: Numerical posting and day-book selection mistakes are clerical errors of commission.
Answer
Treating the construction of a factory shed extension as repairs expense.
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