Q.₹6,000 spent on an extension to the factory building (a capital expenditure) was wrongly debited to the Repairs Account. Pass the rectification entry, before the preparation of final accounts, and state its effect on profit if it is NOT corrected.

An error of principle is corrected by transferring the amount from the wrongly-debited nominal account to the correct capital/asset account — an ordinary two-account entry, no Suspense Account.

Money spent on an EXTENSION to a building adds new capacity/value to the asset — this is Capital Expenditure, and should be added to the Factory Building Account, not treated as a revenue expense. Debiting it to the Repairs Account (a Nominal, revenue-expense account) is an Error of Principle, since it confuses a capital item with a revenue item — the AMOUNT and SIDE were both otherwise correctly recorded, so this error does not disturb the Trial Balance's agreement (it is a two-sided error) and needs no Suspense Account.

Rectification: Factory Building A/c Dr ₹6,000; To Repairs A/c ₹6,000. …

Students sometimes think an error of principle disturbs the Trial Balance because it 'feels' like a big mistake — but as long as the correct AMOUNT was posted to the correct SIDE (even if the wrong ACCOUNT CLASS), the Trial …