The correct answer is option 'C' - Error of commission.

Explanation:
Error of commission refers to a mistake made by recording an incorrect transaction in the accounting records. In this case, the amount of Rs.500 received from a customer has been debited to his account, which means that the transaction has been recorded incorrectly.

Here is a detailed explanation of the different types of errors in accounting:

1. Error of principle: This error occurs when a transaction is recorded against the fundamental principles of accounting. For example, recording a personal expense as a business expense.

2. Error of omission: This error occurs when a transaction is completely left out or omitted from the accounting records. It can happen due to oversight or negligence.

3. Error of commission: This error occurs when a transaction is recorded but with incorrect details. It may involve entering the wrong amount, recording the transaction in the wrong account, or making a mistake in the calculation.

4. Compensating error: This error occurs when one error cancels out the effect of another error. For example, if an expense is overstated and revenue is understated by the same amount, the net effect on the financial statements may be minimal.

In the given scenario, the error of commission has occurred because the amount of Rs.500 received from the customer has been debited to his account. This means that the transaction has been recorded incorrectly as a debit to the customer's account instead of a credit.

To rectify this error, the debit entry should be reversed, and a credit entry should be recorded in the correct account. The customer's account should be credited with Rs.500 to reflect the receipt of funds from the customer.

It is important to identify and correct errors in accounting records to ensure the accuracy of financial information and to present reliable financial statements. Regular reconciliation and review of accounts can help in detecting and rectifying such errors.

When an amount received from a customer it is to be debited to cash account but here by mistake it is debited to customers account that implies wrong account is debited which is an error of commission