I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

error of principle

 involves making a double entry in the belief that the transaction is being entered in 

the correct accounts, but subsequently finding out that the accounting entry breaks the 'rules' of an 

accounting principle or concept. 

 

A typical example of such an error is to treat certain revenue expenditure incorrectly as capital 

expenditure. 

(a) 

For example, repairs to a machine costing $150 should be treated as revenue expenditure, and 

debited to a repairs account. If, instead, the repair costs are added to the cost of the non-current 

asset (capital expenditure) an error of principle would have occurred. As a result, although total 

debits still equal total credits, the repairs account is $150 less than it should be and the cost of 

the non-current asset is $150 greater than it should be. 

(b) 

Similarly, suppose that the proprietor of the business sometimes takes cash out of the till for their 

personal use and during a certain year these withdrawals on account of profit amount to $280. 

The bookkeeper states that they have reduced cash sales by $280 so that the cash book could be 

made to balance. This would be an error of principle, and the result of it would be that the 

withdrawal account is understated by $280, and so is the total value of sales in the sales 

account. 

1.4 Errors of commission