PRC-1 · Chapter 3 · Question 22 of 100
Which of the following scenarios describes a 'Compensating Error' that will remain undetected by a Trial Balance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The sales account was accidentally undercast by Rs. 500, and the rent expense account was concurrently undercast by Rs. 500.
Explanation
Compensating errors occur when two or more independent errors mathematically cancel each other out. If a credit balance (Sales) is short by 500 and a debit balance (Rent) is also short by 500, the trial balance totals will still match.
More Ledgers and Trial Balance MCQs
- Q24Which of the following statements comprehensively defines the 'General Ledger'?
- Q25After extracting a trial balance, the accountant of 'Dynamic Corp' notices the debit column totals Rs. 500,000 and the credit column…
- Q26What is the correct double-entry sequence to formally transfer a net profit of Rs. 250,000 to the owner's equity at year-end?
- Q27Which of the following lists represents the correct sequential order of the fundamental accounting cycle?
- Q28When posting data from the Cash Book, how are individual payments made to credit suppliers processed in a manual ledger system?