Question

Answer in one sentence only :-

What do you mean by compensating errors?

Answer 1

When the effect of one error is compensated by the effect of another error or errors of the same amount, the errors are called compensating errors. Thus, compensating errors counterbalance the effect of each error that occurs in the books of accounts.

For example:
X’s A/c was debited by Rs 550, while it was to be debited by Rs 950 and Y’s A/c was debited by Rs 950, while it was to be debited by Rs 550. Thus, the short debit in X’s A/c is compensated by the excess debit in Y’s A/c.