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What is a Compound Journal Entry?

Compound Journal Entry

Compound means a thing that is composed of two or more separate components. Similarly, when used in accounting, a compound journal entry means a journal entry which includes multiple accounts that are either debited or credited, unlike a simple journal entry which only includes 1 debit and 1 credit.

In other words, an entry which has more than one account in debit, credit, or both is termed as a compound journal entry.

 

Explanation with Example

  • On January 7, YYYY, 9,500 received in cash from Unreal Pvt Ltd. as the full and final settlement of their account worth 10,000. (Allowed a discount of 500)
Date Particulars LF. Debit Credit Type of Account* Rule Applied*
7 Jan YYYY Cash A/C   9500   Real A/C Dr. What comes in 
  Discount Allowed   500   Nominal A/C Dr. All losses 
  To Unreal Pvt Ltd.         10,000 Personal A/C Cr. The giver  

*Used for the explanation purposes.

In the above example of a compound journal entry, there are 2 accounts being debited and 1 account being credited. There are other examples of such entry where you will find more debits than credits or multiple accounts being credited and debited at the same time and so on. It all depends on the complexity of a transaction.

 

>Read How to prepare a journal entry?