PRC-1 · Chapter 8 · Question 19 of 100
Two independent errors of Rs. 1,000 occurring on opposite sides of the ledger, which cancel each other out, are known as:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Compensating Errors
Explanation
Compensating errors happen when two or more distinct errors exactly cancel out each other's effects on the trial balance, meaning it still agrees.
More Correction of Errors MCQs
- Q21If a trial balance does not agree, the difference must initially be placed in a temporary account called the:
- Q22Which of the following errors will require the use of a Suspense Account to correct?
- Q23Capital expenditure of Rs. 100,000 on a new building extension was incorrectly treated as revenue expenditure. What is the impact on the…
- Q24Revenue expenditure of Rs. 20,000 for routine vehicle maintenance was incorrectly capitalized to the Motor Vehicles account. What is the…
- Q25An entity incorrectly overstated its closing inventory by Rs. 15,000. What is the impact on the current year's profit?