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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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