When two or more errors are committed in such a way the effect of one error is compensated by another error. Which type of error is this?

Error of Commission

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Compensating Error

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Error of Principle

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None of these

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Solution

The correct option is A Compensating Error
When an error is compensated by another error, it is called a compensating error. For example, an amount of Rs.5000 received from Ram is credited to his account as Rs.500, on the other hand, an amount of Rs.5000 paid to Sunil is debited to his account as Rs.500. In this case, one short credit of Rs.4500 is compensated by short debit of Rs.4500.
One error has compensated the other error.

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Similar questions

Two or more errors when committed in such a way that there is increase or decrease in the debit side due to an error, also there is corresponding decrease or increase in the credit side due to another error by the same amount. These errors ae known as:

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

Q. Errors which compensate the effect of each other are called __________ errors.

Give one word/term on phrase for each of the following statements.

1) Errors of incorrect entries or wrong posting.
2) Account to which difference in trial balance is transferred.
3) Errors which are committed by clerks.
4) Transaction remained to be recorded at all in the books of accounts.
5) Error in which the effect of one mistake is nullified by another mistake.
6) An entry passed to cancel wrong effects given and give correct effects to accounts affected.
7) Errors of calculation.
8) Error which affects the agreement of trial balance.
9) Error which are not disclosed by the trial balance.
10) Taking the Total more while closing books of accounts

State whether the following statements are True or False-

1) A trial balance can agree in spite of certain errors.
2) Errors committed due to lack of accounting knowledge are errors of omission.
3) Trial balance is prepared from the balance of ledger accounts.
4) Rectification entries are passed in cash book.
5) Single sided errors affect only one account.
6) Suspense account is automatically closed after rectification of all errors.
7) Errors affecting the agreement of trial balance are called on side errors.
8) There is no need to open a suspense account if the trial balance agrees.
9) All the errors can be rectified only through suspense account.
10) Compensating errors affect the agreement of trial balance.

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