PRC-1 · Chapter 8 · Question 16 of 100
A machine was purchased for Rs. 50,000. The accountant recorded the transaction by debiting the Purchases account and crediting the Bank account. This error is known as an:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Error of Principle
Explanation
Recording a capital expenditure (machine) in a revenue expenditure account (Purchases) violates fundamental accounting principles, classifying it as an error of principle.
More Correction of Errors MCQs
- Q18An invoice of Rs. 4,500 received from a supplier was initially recorded in the purchases day book as Rs. 5,400. This is an example of an:
- Q19Two independent errors of Rs. 1,000 occurring on opposite sides of the ledger, which cancel each other out, are known as:
- Q20The total of the sales day book was under-casted by Rs. 5,000. How does this affect the trial balance?
- Q21If a trial balance does not agree, the difference must initially be placed in a temporary account called the:
- Q22Which of the following errors will require the use of a Suspense Account to correct?