Q.A firm's Trial Balance still agrees even though its books contain two independent mistakes: the Purchases Book has been overcast by ₹800 (inflating the debit side), and, quite separately, the Sales Book has also been overcast by ₹800 (inflating the credit side). What type of error is this?

Two separate, unrelated mistakes have accidentally offset each other's effect on the Trial Balance, so the Trial Balance still agrees despite genuine errors existing.

Why (c) is correct: A Compensating Error occurs when two or more independent errors happen, by coincidence, to offset each other's net effect on the Trial Balance. Here, the ₹800 overcast on the debit side (Purchases Book) is exactly cancelled out by the unrelated ₹800 overcast on the credit side (Sales Book) — the Trial Balance agrees, but the books genuinely contain two separate mistakes that a Trial Balance check alone will never reveal.

Why the distractors are wrong:

• (a) No accounting principle (like capital vs. revenue) has been violated here — both mistakes are purely arithmetical (casting) errors.
• (b) While each individual overcast IS technically an Error of Commission, that label alone misses the crucial point being tested — that the TWO errors together happen to cancel out in the Trial Balance, which is a distinct, named category (Compensating Error) precisely because of that offsetting effect.
• (d) No transaction has been omitted here — both the purchases and sales are recorded; they are simply mis-totalled.

Students sometimes think a compensating error must involve the SAME account or the SAME type of book on both sides. It does not — the two underlying errors can be completely unrelated in nature and location; the only requirement is that their net effect on the Trial Balance happens to cancel out.