What is a Compound Journal Entry?
A compound journal entry is one in which the accounting transaction involves more than two accounts and therefore more than one account is debited or credited.
Compound Journal Entry Examples
Simple Journal Entry Example
A journal entry usually involves two accounts with one debit entry and one credit entry and is referred to as a simple journal entry. For example, if cash is received from a customer in respect of an outstanding account, the following simple journal entry is made.
Notice that in this simple journal example there are only two accounts cash and accounts receivable, and the transaction has one debit entry and one credit entry.
Compound Journal Entry Example 1
In contrast to this a compound journal entry would involve more than two accounts. Suppose in the above example the business offered a 2% (20) discount for early settlement and the customer sent a payment of 980. The journal entry to record the transaction would be as follows.
In this compound journal entry example there are three accounts cash, discount allowed, and accounts receivable, and the transaction has two debit entries and one credit entry.
Compound Journal Entry Example 2
As an additional example of compound journal entries, suppose a business settles an accounts payable account for 2,300 after deducting a settlement discount of 4% (92). The following journal entry would be made
Again, in this journal entry there are three accounts involved, cash, accounts payable, and discount received, and the transaction has one debit entry and two credit entries.
Further examples of compound journal entries can be seen at our double entry bookkeeping journal examples page.
Learn a new Bookkeeping Term
Random bookkeeping terms for you to discover.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.