PRC-1 · Chapter 3 · Question 74 of 100
The Sales account was undercast by Rs. 1,000. By coincidence, the Rent Expense account was also undercast by Rs. 1,000. What type of error does this represent?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Compensating error
Explanation
A compensating error occurs when two or more unrelated errors mathematically cancel each other out. Since a credit (Sales) and a debit (Rent) are both short by Rs. 1,000, the trial balance will still agree.
More Ledgers and Trial Balance MCQs
- Q76If a customer's individual account in the Receivables Ledger displays a credit balance, what is the most likely reason?
- Q77In an adjusted trial balance, how is 'Prepaid Rent' classified, and in which column does its balance appear?
- Q78How is 'Unearned Commission Income' treated in a trial balance?
- Q79What is the specific accounting term for the process of transferring financial figures from the books of prime entry into the ledger…
- Q80In a standard manual ledger account, there is a column labeled 'Folio'. What is its primary purpose?