Compound Journal Entry: Definition

A compound journal entry is a journal entry that involves more than two accounts.

When two or more transactions of the same nature take place on the same date, accountants prefer to make a compound journal entry instead of two or more separate journal entries.

There are two conditions to satisfy in a compound journal entry:

  1. The date of the transactions being compounded should be the same
  2. The nature of these should also be the same

In a compound journal entry, debit, credit, or both parts of the entry consist of more than one account.

Example 1

On 1 June 2016, Sam started a business with $25,000 in cash, along with furniture costing $5,000.

The above transaction consists of three accounts: cash account, furniture account, and capital account.

These transactions can be journalized by making either two separate journal entries or one compound journal entry. Both the methods are illustrated below.

If two separate journal entries are made:

Example 1 Separate Journal Entries

If a compound journal entry is made:

Example 1 Compound Journal Entry

Example 2

On 10 June, Sam received $1,950 in cash from Mr. X, a customer. Mr. X was allowed a cash discount of $50.

The above transaction also has three accounts: cash account, accounts receivable, and discount allowed account. Again, Sam has the option to make two separate journal entries or a compound journal entry.

If two separate journal entries are made:

Example 2 Separate Journal Entries

If a compound journal entry is made:

Example 2 Compound Journal Entry

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