This types of errors occur when the principle of accounting are not followed at the time of making journal entry. Error of the principles involves whenever the amount received or paid is not properly allocated to correct heads or the basic rules of debit or credit are not followed. The distinction between revenue and capital is most important because any incorrect allocation can affect the true financial position of the business firm. Following are the few examples to clarify the errors of principles:-
4. Wages paid in respect of installing the machinery debited to wages account. It is wrong. It should go to machinery account since it is not wages of trading items but for machinery and it will be treated as the part of machinery.
5. Advance paid to worker is debited to salary account while it is not expenditure. The advance is a current asset and can be adjusted in future or can be received from the worker.