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.
More from this Section
- Last-in, First-out (LIFO)
Last-in, First-out (LIFO) method is an inventory costing method that assumes the costs ... - Bookkeeping
Bookkeeping is a part of accounting process that involves only the recording of economic ... - Financing activities
Financing activities refer to cash flow activities that include (a) Obtaining cash from ... - Sustainable Growth Rate
Sustainable Growth Rate relates to the greatest pace of development that a firm can maintain ... - Indirect method
Indirect method is a method of preparing a statement of cash flows in which net income ...