Which of the following errors is an Error of Principle? MCQ with Answer and Explanation

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Which of the following errors is an Error of Principle?

A. Treating wages paid for installation of machinery as normal wages

B. Posting a debit entry to the credit side

C. Posting Rs 500 as Rs 5,000

D. Forgetting to record a sales invoice entirely

Answer: Option A

Solution (By JKSSB Mock Tests)

Treating capital expenditure (installation of machinery) as revenue expenditure (normal wages) violates fundamental accounting principles.

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Question #1

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If a partner advances a loan to the firm and the partnership deed is silent, the interest on the loan is payable at:

A. 5% p.a.

B. 12% p.a.

C. 6% p.a.

D. Bank rate

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Correct Answer: Option C

Explanation:
The Indian Partnership Act stipulates that partners are entitled to 6% p.a. interest on any advances or loans given to the firm beyond their capital.

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Question #2

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'Segment Reporting' is governed by:

A. AS 20

B. AS 17

C. AS 18

D. AS 19

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Correct Answer: Option B

Explanation:
AS 17 requires disclosure of segment-wise information for listed companies and those in the process of listing.

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Question #3

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The 'Going Concern' assessment: If management concludes that the entity is not a going concern, the financial statements should be prepared on:

A. Cash basis

B. Going concern basis

C. Break-up basis (liquidation basis)

D. Accrual basis

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Correct Answer: Option C

Explanation:
If not going concern, financial statements are prepared on a break-up basis.

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