Debit side of XYZ's a/c was overcast by Rs.1,000, on the other hand credit side of PQR's account was overcast by Rs. 1,000. This is a case of __________error.

principle

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compensating

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commission

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none of the above

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Solution

The correct option is C compensating
When two or more errors are committed in such a way that the net effect of these errors on the debits and credits of accounts is nil, such errors are called compensating errors. Such errors do not affect the tallying of the trial balance. For example, the debit side of XYZ's A/c was overcast by Rs. 1,000 resulting in the excess debit of Rs. 1,000, on the other hand, credit side of PQR's account, was overcast by Rs. 1,000 resulting in excess credit of Rs. 1,000, which is a case of two errors compensating each other's effect.

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Similar questions

Sohan’s A/c is debited by Rs. 2,500 while it was to be debited by Rs. 3,500 and Mohan’s A/c is debited by Rs. 3,500 while the same was to be debited by Rs. 2,500. For this error, which of the following can be a rectifying entry?

Q. There was a difference of ₹ 430 in a Trial Balance. It was placed on the Debit side of a Suspense A/c. Later on the following errors were discovered. Pass rectifying entries and prepare Suspense A/c.
1. Purchases book was overcast by ₹ 100.
2. Sales book was overcast by ₹ 1,000.
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1) Paid Rs 700 to Nishigandha was debited to pritigantha account.
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Manish A/c is credited by Rs. 4500 while Manish A/c was to be debited by the same amount. Which of the following is correct?

Q. A Book-keeper failed to balance his trial balance, the credit side exceeding the debit side by ₹ 175. This amount was entered in a Suspense Account. Later on the under mentioned errors were discovered:-
1. Goods amounting to ₹ 620 sold to D & Co. were correctly entered in the Sales book, but posted to the Company's A/c as ₹ 260.
2. A credit balance of ₹ 755 of Rent Received account was shown as ₹ 570.
3. The total of Returns Outwards Book amounting to ₹ 200 was not posted to the Ledger.
4. Goods worth ₹ 100 were purchased from Prakash but the amount was entered in the Sales Book. The account of Prakash was correctly credited.
5. Sales Book was undercast by ₹ 100.
6. The total of the credit side of Sohan's account was overcast by ₹ 100.
Give journal entries to rectify these errors and prepare the Suspense Account.

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