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It often happens that mistakes are committed due to inadequate knowledge regarding accountancy. The accountant fails in discriminating between his company’s revenue and capital expenditure. He often records capital expenditure in place of revenue expenditure and revenue in place of a capital expenditure.
For instance, instead of debiting the purchases account or building account during the purchase of machinery, the payment regarding wages for a building construction can be incorrectly debited to wages account. Such errors can even occur due to incorrect treatment of capital receipts and revenue receipts. For instance, instead of crediting the company’s furniture account, the accountant credits sales accounts when some furniture is sold.
However, in errors of principle, such mistakes do not have any effect on the trial balance. This is because both the credit and debit record remains incomplete. Since the double entry record is complete, a trial balance will tally in spite of having errors.
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- Errors affecting or disclosed by trial balance introducing the concept
- Errors omission and errors of commission
- Errors in the subsidiary books and their rectification
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