Dog bone by mistake? That is right (7)
I believe the answer is:
terrier
'dog' is the definition.
(terrier is a kind of dog)
'bone by mistake? that is right' is the wordplay.
'bone' becomes 't' (as in a T-bone steak).
'by' means one lot of letters go next to another.
'mistake?' becomes 'err' (to err is to make a mistake or blunder).
'that is' becomes 'ie' (abbreviation for id est, 'that is' in Latin).
'right' becomes 'r' (abbreviation).
't'+'err'+'ie'+'r'='TERRIER'
(Other definitions for terrier that I've seen before include "Dog originally used to ferret out burrowing animals" , "Reserve soldier" , "Small lively dog, may be Scotch" , "he's not a boxer" , "Dog bred for hunting" .)