The errors occurring from surplus debits or under debits of accounts being neutralized by the surplus credits or under credits to the similar extent of some other account is compensating error. Compensating errors occurs while preparing trial balance, it happens when an error on debit side is remunerated by an error on credit side and therefore it does not have any consequence on the agreement of trial balance or in other words trial balance matches.
Since the errors in one direction are compensated by errors in another direction, mathematical correctness of the trial balance is not at all affected arouse of such errors. For example,
- If the purchases book and sales book are both overcast (surplus totaling) by $ 1,000 the errors equally compensate each other. This error will not affect the agreement of trial balance.
- When an amount of $327 to be written on debit side is written as $237 and at the same an amount of $546 is written as $456 on the credit side.