The proceeds from selling an old office vehicle are credited to Sales Account instead of the Vehicle Account. Which statement is correct?
Correct answer: A. It is an error of principle that may not affect the trial balance
- A. It is an error of principle that may not affect the trial balance
- B. It is an error of omission that always creates suspense
- C. It is an error of commission that makes debits exceed credits
- D. It is a compensating error that requires two wrong entries
Explanation
The transaction is recorded in the wrong type of account because disposal proceeds are not ordinary sales revenue. Both accounts are credited, so the trial balance can still agree despite the classification error.
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About Correction of Errors and Suspense Accounts
Accounting errors are corrected by journal entries after identifying whether the mistake affects one account or both sides of double entry. Suspense accounts temporarily hold an unexplained trial balance difference and must be cleared, while errors of omission, commission, principle, original entry and reversal require different corrections.
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