The
Definition Of

Compensating error

        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.

Share it:  Cite

More from this Section

  • Closing the books
    At the end of the accounting period, the company makes the accounts ready for the next period. This is called closing the books. In closing the books, the company...
  • Bonds
    Bonds are a form of interest-bearing notes payable issued by corporations, universities, and governmental entities.
  • Indirect materials
    Indirect materials are those raw materials which cannot be easily associated with the finished product.
  • Manufacturing Overhead
    Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product. These costs may also be manufacturing costs...
  • Voucher register & Check register
    An employee in accounts payable records the voucher which in a journal called a voucher register and files it according to the date on which it is to be paid.
  • CVP income statement
    CVP income statement is a statement for internal use that classifies costs as fixed or variable and reports contribution margin in the body of the statement.
  • Other receivables
    Other receivables include various forms of nontrade receivables which do not generally result from the operations of the business.