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    Question

    The error of principle occurs

    when:
    A A transaction is completely omitted from the books. Correct Answer Incorrect Answer
    B A transaction is recorded in the wrong subsidiary book. Correct Answer Incorrect Answer
    C A fundamental accounting principle is violated. Correct Answer Incorrect Answer
    D There is a mistake in posting to the correct ledger account. Correct Answer Incorrect Answer
    E The trial balance does not tally. Correct Answer Incorrect Answer

    Solution

    An error of principle occurs when a transaction is recorded in violation of accounting principles, such as treating a capital expenditure as a revenue expenditure (e.g., charging machinery repairs to the Machinery account).

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