Two independent errors cancel each other so that the trial balance agrees. What are these errors called?
Correct answer: C. Compensating errors
- A. Errors of original entry
- B. Errors of principle
- C. Compensating errors
- D. Errors of complete omission
Explanation
Compensating errors offset one another in amount and effect on the trial balance. Agreement of the trial balance therefore does not prove that the accounts are completely accurate.
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About Correction of Errors and Suspense Accounts
Accounting errors are corrected by journal entries after identifying whether the mistake affects one account or both sides of double entry. Suspense accounts temporarily hold an unexplained trial balance difference and must be cleared, while errors of omission, commission, principle, original entry and reversal require different corrections.
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