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:

More from this Section

  • Accounts receivable
    Accounts receivable are amounts owed by customers on account. They result from the sale of goods and services. Companies generally expect...
  • Standards
    Standards are common in business. Those imposed by government agencies are often called regulations. They include the Fair Labor Standards Act, the Equal...
  • 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...
  • 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
  • Gross earnings
    Gross earnings are the total compensation earned by an employee. It consists of wages or salaries, plus any bonuses and commissions.
  • Management consulting
    Management consulting is an area of public accounting ranging from development of accounting and computer systems to support services for marketing...
  • Direct labor
    The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is called direct labor.