ACCA Applied Knowledge · Financial Accounting · Correction of errors
A business purchased a delivery van for $12,000 and debited the amount to the motor vehicles repairs expense account. Which type of error is this?
This is an error of principle. A van is capital expenditure and should be recorded as a non-current asset, but it was debited to a repairs expense, which is the wrong class of account. Commission errors stay within the same class of account.
- AError of commission
- BError of principleCorrect
- CError of omission
- DCompensating error
Explanation
Capital expenditure has been treated as revenue expenditure, so the wrong class of account (expense instead of non-current asset) was used. That is an error of principle. An error of commission involves the wrong account within the same class, such as another asset account.
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