Maintenance charges of equipment debited to Equipment Account is an ________*1 pointError of commissionError of OmissionError of PrincipleNone of the above
Question
Maintenance charges of equipment debited to Equipment Account is an ________
1 point
- Error of commission
- Error of Omission
- Error of Principle
- None of the above
Solution
The correct answer is "Error of Principle".
Here's why:
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An Error of Principle occurs when the fundamental principles of accounting are not observed, or there is a violation of these principles.
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In this case, maintenance charges for equipment should not be debited to the Equipment Account. Instead, they should be debited to the Maintenance Expenses Account.
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The Equipment Account should only be debited when the business acquires new equipment or upgrades existing ones.
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Therefore, debiting the Equipment Account for maintenance charges is a violation of the accounting principle of expense recognition, hence an Error of Principle.
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