Compound Journal Entry

A compound journal entry is the journal entries in the accounting system where more than one account is debited or more than one account is credited i.e. when a transaction has to effect on more than the three accounting heads.

Compound Journal Entry Definition

Compound Journal Entry means a combination of two or more debits and credits in a single accounting entry Accounting EntryAccounting Entry is a summary of all the business transactions in the accounting books, including the debit & credit entry. It has 3 major types, i.e., Transaction Entry, Adjusting Entry, & Closing Entry. read more. It means it is a journal entry with the following combinations:

  1. One debit and two or more credits, or
  2. One credit and two or more debts, or
  3. Two or more debits and credits

As per the rule of journal entryRule Of Journal EntryJournal Entries are records used to keep a tab on every business transaction through debits & credits. The rules include having a minimum of 2 accounts (1Debit & at least 1Credit), listing debits before credits, & debit amounts always being equivalent to credit amounts. read more, the total of debits and credits should always be equal. Combination Journal Entries may include Depreciation, Payroll, various items in a particular invoice, bank reconciliation, the single transaction involving multiple components, etc. Professionals based on their professional judgment and experience can merge various journal entries.

Compound-Entry

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Source: Compound Journal Entry (wallstreetmojo.com)

Compound Journal Entry Examples

Let’s understand the compound entry with examples:

Example #1

ABC limited, on 31st March, has the following list of assets with depreciation amount to be charged in the books of account:

Example 1

Please pass the compound journal entry individually and in a compound format.

Solution:

Compound Journal Entry 1
Compound Journal Entry 1-1

From the above, it is evident that compound entry saves time and energy, as more data can be presented concisely with better presentation.

Example #2

Mr. ABC put his son to B-school for management studies. There he paid $ 90,000, including all the components. The list of the component of the same are as given below:

Example 2

Please pass compound journal entry in the books of B-school individually and compounded one.

Solution :

Journal Entry
Compound Journal Entry 2-1

Advantages

Disadvantages

Conclusion

Thus, compound entry is a more efficient form of accountancy, which enhances the productivity of the accountant and leads to a better accounting presentation. As per the applicable standard and guidelines in a particular nation, the accountant can frame compound journal entry and try to optimize the time and efforts.

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