The correct answer is D. Compensating error.
A trial balance is a list of all the accounts in a company’s general ledger, with their balances at a specific point in time. It is prepared by listing the accounts in the order in which they appear in the ledger, and then totaling the debit and credit balances for each account. The two totals should be equal, which is called a trial balance.
A trial balance does not disclose errors that are offsetting, or compensating, errors. For example, if a company mistakenly records a $100 debit to Accounts Payable and a $100 credit to Cash, the trial balance will still balance. This is because the two errors cancel each other out.
Errors that are not offsetting, or compensating, errors will be disclosed by a trial balance. For example, if a company mistakenly records a $100 debit to Accounts Payable and a $50 credit to Cash, the trial balance will show a $50 debit balance in Accounts Payable and a $50 credit balance in Cash. This is because the two errors do not cancel each other out.
Errors in entering an amount in the account, wrong totaling of an account, and decrease in gross profit percentage are all examples of errors that will be disclosed by a trial balance.