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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