A compensating error is one which counter-balanced by any other error or errors, e.g., if A’s account was to be debited for Rs. 10 was debuted for Rs. 100 but was debited for Rs. 10 by mistake B’s account was to be debited for Rs. 10 was debited for Rs. 100 by mistake, such a mistake will not affect the trail balance. Such an error may or may not affect the profit and loss account.
Similarly, an over-casting of an account may be counterbalanced by the under-casting of another account to the same extent. This type of error will not affect the trail balance and will be detected easily. Such errors may or may not affect the profit and loss account.
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Drawings refer to the withdrawal of cash or other assets from an unincorporated business for the personal use of the owner. Drawings decrease the owner’s equity.
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Quality of earnings provides full and transparent information that will not confuse or mislead users of the financial statements.
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The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money.
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- Time ticket
The time ticket is a document that indicates the employee, the hours worked, the account and job to be charged, and the total labor cost.
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