Question

_________ are neutralizing in nature, hence one error is compensated by other error or errors of opposite nature.

• A. Errors of principle
• B. Complete omissions
• C. Compensating errors
• D. Errors of commission

Answer 1

Answer: (C)

Compensating errors

When one error of accounting is compensated by the other error, these are called compensating error. Compensating error nullify the affect and trial balance will not have any disagreement.

For example, an amount of Rs.1000 received from Ram is credited to his account as Rs.100 on the other hand, an amount of Rs.1000 paid to Sunil is debited to his account as Rs.100. A short credit of Rs.900 in Ram's a/c is neutralized by a short debit to Sunil's a/c.