Offsetting error

An offsetting error is a mistake that counteracts another mistake. The concept most commonly occurs in accounts payable, when an expense is charged to the wrong accounting period. For example, an invoice for $10,000 is charged to expense in January when it should have been charged in February. This means the income statement shows a before-tax profit in January that is too low by $10,000 and an income statement in February that is too high by $10,000. These two events offset each other, so the year-to-date income statement is correct by the end of February.

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Accounting Changes and Error Corrections