Q.Kavya Traders' Trial Balance agreed, yet it was later discovered that the Purchases Book had been overcast by ₹500, and separately, the Sales Return Book had been undercast by ₹500. Explain why the Trial Balance still agreed despite these two errors, and pass the rectification entries.

Each error alone is one-sided (it affects only one ledger account), but because the two errors are of the same amount and their combined effect on the debit column cancels out (one overstates it, the other understates it by the same amount), the Trial Balance never showed any disagreement at all.

Purchases Book overcast by ₹500 means ₹500 MORE than the genuine total was posted to the debit of Purchases Account — the debit column of the Trial Balance is, because of this error alone, OVERSTATED by ₹500.

Sales Return Book undercast by ₹500 means ₹500 LESS than the genuine total was posted to the debit of Sales Return Account (a debit-natured account, since it reduces sales) — the debit column of the Trial Balance is, because of this error alone, UNDERSTATED by ₹500.

Because one error overstates the debit column by exactly ₹500 and the other understates it by exactly ₹500, their NET combined effect on the debit column's total is nil — the debit column's grand total comes out exactly as it should, still equal to the credit column, and the Trial Balance agreed perfectly despite BOTH individual errors genuinely existing. This is precisely what makes a Compensating Error the hardest kind to detect — the Trial Balance itself gives no signal that anything is wrong.

Each error, taken individually, is still a one-sided error (it wrongly affects only ONE ledger account), so each is rectified through the Suspense Account:

1. Purchases A/c overcast — Suspense A/c Dr ₹500; To Purchases A/c ₹500 (reducing the overstated Purchases balance).
2. Sales Return A/c undercast — Sales Return A/c Dr ₹500; To Suspense A/c ₹500 (increasing the understated Sales Return balance). …

Students sometimes think a Compensating Error needs no rectification at all, since the Trial Balance already agreed — but each underlying account (Purchases, Sales Return) is still genuinely WRONG and must be individually corrected; the fact that the Trial Balance agree …