What Are Errors Of Principles In Auditing?

The errors of principle consist of wrong allocation of expense between capital and revenue items. The capital items can be treated as revenue and vice versa. The carriage paid on machinery can be charges to carriage account. These errors can not affect the trial balance. The errors of principle relate to omission of outstanding assets. These assets include prepaid insurance, prepaid taxes, prepaid rent, prepaid interest and salaries plan in advance, accrued income, rent, receivable, interest receivable and so on. It is an error of principle. These liabilities include wages unpaid, carriage outstanding, rent due, tax payable, commission payable, interest payable and unearned income.

The error of principle related to wrong valuation of floating and fixed assets. The current assets may not be valued at cost or market rule. The fixed assets may not be valued at cost less depreciation. Such valuation does not affect the trial balance. The error of principle relates to recording of expense as income or vice versa. The commission expense can be recorded as income. The interest expense can be stated as income. The errors of principle relates to concealing title of expenditure account.  The repair to machinery may be charged to depreciation account. The advertising expenses may be recorded as repair to assets. The actual head of expenditure is not disclosed.