QS Study

Errors of Principle in accounting, happens when one or both of the entries are made in the wrong class or category of account. Transactions are recorded as per usually accepted accounting principles. If any of these principles is violated or ignored, errors resulting from such violation are known as errors of principle. For example, Purchase of assets recorded in the purchases book. It is an error of principle, because the purchases book is meant for recording credit purchases of goods meant for resale and not fixed assets. A trial balance will not disclose errors of principle.

An error of principle is a technical error, meaning that the value recorded was the correct value but placed wrongly. For example, amount spent on additions to the buildings should be treated as capital expenditure and must be debited to the asset account. Instead, if this amount is debited to upholding and repairs s account, it has been treated as a profits expense. This is an error of principle.

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