What is an example of an omission error in accounting?

An omission error in accounting occurs when a transaction or necessary adjustment is not recorded in the financial statements, leading to incomplete or inaccurate financial reporting. In this context, failing to adjust for depreciation is a clear example of an omission error. Depreciation is a crucial adjustment needed to reflect the reduction in value of fixed assets over time. By neglecting to include depreciation in the accounts, a business inaccurately presents its assets and, consequently, its profitability, which can mislead stakeholders about the true financial state of the organization.

The other options, while they reflect different types of errors, do not qualify as omission errors. For instance, recording an expense in the wrong period relates more to timing issues within the accounting period rather than omitting an entry entirely. Misclassifying personal expenses as business expenses involves incorrect categorization rather than omission. Lastly, misapplying the revenue recognition principle is a fundamental oversight in the application of accounting rules, rather than merely failing to record something altogether.