Purchase account is overcast by ₦200, while wages account is undercast by ₦200. This is
- an error of omission
-
a compensating error
- an error of commision
- an error of principal
The correct answer is: B
Explanation
Compensating errors are errors equal in amount but opposite in sense that cancel each other. It occurs when one wrong entry neutralizes the impact of another incorrect entry.
For instance when the effect of one transaction is neutralized by another error. When the effect of errors committed cancels out such errors it is called compensating errors.