Forums
Back
Rectification of entries
Accountancy
Difference between error of ommision and compensatory errors
Answers (5)
Best Answer
These 2 errors are very different yet often confused as the effect on trial balance of both may be same in some cases 1. Error of Omission - Where a transaction as a whole or part is not recorded only(omitted) . now if part omission happens (eg. purchase asset you go to ledger and put the amount in credit side of cashbook but no entry in asset a/c) then trial balance will not tally as credit side will be more , However if the whole transaction is omitted (i.e. No entry at all) then trial balance will tally 2. Compensating Errors- This is basically an error which gets set off due to another accounting error . For example you made a sale of Rs 1000 this was recorded in the books correctly but the amount was recorded as Rs 100 so there is a difference of Rs 900 on credit side , now another transaction of purchase happens of Rs 1000 again same error made of amount recorded as Rs 100 now there will be difference of Rs 900 on debit side as well . When the trial balance is made it will tally as the error amount on debit side and credit side is same . Hence it got compensated. These errors are difficult to locate as the trial balance will tally.
If an transaction is completely r partially omitted from the books then it will be error of omission for eg If asset purchased for cash I.e.,, asset a/c Dr To cash a/c Instead of debiting asset if any other a/c is debited then it is error of omission If the effect of errors commited cancel out, it is compensating errors
anusha athikamsetty
If an transaction is completely r partially omitted from the books then it will be error of omission for eg If asset purchased for cash I.e.,, asset a/c Dr To cash a/c Instead of debiting asset if any other a/c is debited then it is error of omission If the effect of errors commited cancel out, it is compensating errors
Error of compensating in detail please
For suppose if cash received form ram is 50 RS then entry will be cash a/c Dr To ram a/c If ram a/c is not credited and the total of sales book is 50 in excess .the omission of credit to A a/c will be made up by the increased credit to sales a/c Hence trial balance will agree bcoz both having cr Bal
For Example â?? Goods sold to Mr. X amounted rupees5000was posted to the debit side of X account with 500 only. The error will reduce the debit total of trial balance by 4500. Suppose at the same time receipt of 5000 rupees from Mr. P was wrongly credited to Mr. P  acc as 500 rupees. In this case, the amount of 4500 rupees is less credited. Such an error will reduce 4500 from the credit side of the trial balance
