An 'Error of Principle' occurs when: MCQ with Answer and Explanation

Question
An 'Error of Principle' occurs when:
A. Wrong amount is posted
B. A transaction is completely omitted
C. Posting to wrong personal account
D. A capital expenditure is treated as revenue expenditure
Answer: Option D
Solution (By JKSSB Mock Tests)
Error of principle violates accounting principles, e.g., incorrect classification between capital and revenue.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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Practice More Accountancy and Book Keeping Questions

Question #1
S1: Margin of Safety is the excess of break-even sales over actual sales. S2: Margin of Safety is calculated as (Actual Sales - Break-Even Sales). Which statement(s) is/are correct?
A. S2 only
B. Both S1 and S2
C. Neither S1 nor S2
D. S1 only
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Correct Answer: Option A

Explanation:
Margin of Safety is the excess of *actual* or *budgeted* sales over the break-even sales, not the other way around. S1 is incorrect. S2 correctly states the formula: Actual Sales - Break-Even Sales.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
A budget that is designed to change in accordance with the level of activity actually attained is a:
A. Zero-based Budget
B. Flexible Budget
C. Rolling Budget
D. Fixed Budget
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Correct Answer: Option B

Explanation:
A flexible budget adjusts for varying levels of output, clearly separating fixed and variable costs.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
A firm's 'Capital' is equal to:
A. Total liabilities
B. Net assets (Total assets - Outside liabilities)
C. Total assets
D. Fixed assets
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Correct Answer: Option B

Explanation:
Capital (owner's equity) = Total assets - Outside liabilities.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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