Class 11 Accountancy - Chapter Trail Balance and Rectification of Errors NCERT Solutions | Explain errors of principle and give two

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Question 2

Explain errors of principle and give two examples with measures to rectify them.

Answer

When some fundamental principle of Accountancy is violated while recording a transaction, the error is termed as error of principle. These errors are committed in those cases where a proper distinction between capital and revenue items is not made, i.e., a capital expenditure is treated as a revenue expenditure or vice-versa.

These errors may be of two types:-

a) When a capital expenditure is treated as revenue expenditure.
For example, if the purchase of furniture is treated as an ordinary purchase and is thus debited to purchase account instead of furniture account, it will be an error of principle.
Similarly, if the amount spent on the extension of a building is debited to a repairs account instead of a building account, it is also an error of principle.

b) When a revenue expenditure is treated as capital expenditure
For example, if the amount spent on the repair of an old machinery is debited to the machinery account instead of the repairs account.

Measures to Rectify Errors of Principle

If an irrelevant account has been debited instead of the correct account: Debit the account that should have been debited. Credit the account that has been erroneously debited.

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