Question

Incorrect allocation of expenditure between Capital and Revenue, ignoring out-standing assets and liabilities, wrong valuation of assets are the examples of:

• A. Errors of Principles
• B. Errors of Commission
• C. Errors of Omission
• D. Errors of Duplication

Answer 1

Answer:

A. Errors of Principles

• Errors of Principle occur when accounting entries are made in violation of fundamental accounting principles or concepts.

• These errors happen not because of wrong amounts, but because of wrong classification or treatment of items.

• Examples include:

• Treating a capital expenditure (like purchase of machinery) as a revenue expense (like repairs).

• Ignoring outstanding assets or liabilities, which violates the accrual principle.

• Incorrect valuation of assets, violating the cost or prudence principles.