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

  • Dates for dividend declaration
    Three dates are important in connection with dividends: (1) the declaration date, (2) the record date, and (3) the payment date.
  • Account
    An account is an accounting record of increases and decreases in a specific asset, liability, or owner’s equity item. In its simplest form, an account consists of ...
  • Debenture bonds
    Debenture bonds also known as unsecured bonds issued against the general credit of the borrower.
  • Internal check
    Internal check is a method of organizing the accounts system of a business concern or factory where the duties of different clerks are
  • Units-of-activity
    Units-of-activity is a depreciation method in which useful life is expressed in terms of the total units of production or use expected from an asset, rather than as a time period.
  • Financing activities
    Financing activities refer to cash flow activities that include (a) Obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders...
  • Owner’s equity
    The ownership claim on total assets is owner’s equity. It is equal to total assets minus total liabilities. Here is why: the assets of a business are claimed by...