Explanation:

The correct answer is option 'B', which means that the purchase of office furniture Rs. 1,200 debited to the General Expense Account is an error of principle.

Error of Principle:
An error of principle occurs when a transaction is recorded in the wrong account due to a mistake in the fundamental principles or concepts of accounting. It is a serious error that violates the basic principles of accounting and leads to an incorrect presentation of financial information.

Reasoning:
In this case, the purchase of office furniture should have been debited to the Furniture and Fixtures Account (or a similar asset account) instead of the General Expense Account. The General Expense Account is typically used to record expenses such as salaries, rent, utilities, etc., that are incurred for the day-to-day operations of the business.

However, office furniture is a capital expenditure and should be recorded as an asset on the balance sheet. By debiting the General Expense Account, the business incorrectly treated the purchase as an expense, which violates the principle of properly classifying transactions.

Impact:
The error of principle affects the accuracy of the financial statements. By debiting the General Expense Account, the business understates its assets and overstates its expenses. This can lead to an incorrect calculation of net income and a misrepresentation of the financial position of the business.

Correction:
To rectify the error, the entry should be reversed by debiting the General Expense Account and crediting the Furniture and Fixtures Account for Rs. 1,200. This will transfer the amount from the expense account to the correct asset account.

Lesson:
This error highlights the importance of understanding and applying the basic principles of accounting. It is crucial to correctly classify transactions and record them in the appropriate accounts to ensure accurate financial reporting. Regular review and reconciliation of accounts can help identify and rectify errors of principle.