Compound Journal Entries Examples

A compound journal entry is one in which more than one account head is debited or credited, in the simple journal entry there is only one debit and one credit whereas in the case of compound journal entry there are two debit or two credits or both that is two credits as well as two debits. In order to understand more about this concept let’s look at some of the examples of compound journal entries –

A.  If company purchases asset like machinery worth $50000 from ABC company by paying half amount in cash and half amount is kept as unpaid than following compound journal entry will be passed –

                                           Machinery account Dr             $50000

                                                         To cash account                            $25000

                                                         To ABC company account           $25000   

B.  Another example of compound journal entry is when company pays various expenses like rent, electricity, telephone charges at the end of month together in cash then following compound journal entry will be passed in the books of accounts of the company –

                                         Rent account Dr   $1000                               

                                        Electricity account Dr $2000

                                        Telephone charges account Dr $500

                                                                            To cash account          $3500

C.  When company pays back loan in the form of installment of $5000 and interest portion of this loan is $1000 and principal repayment is $4000 then following compound journal entry will be passed in the books of accounts of the company –

                                     Interest account Dr         $1000

                                      Loan account      Dr          $4000

                                                            To cash account        $5000

D.  When company does cash sales worth $10000 and the party pays half amount in cash and half amount is kept outstanding then following compound journal entry will be passed by the company in the books of accounts –

                                             Cash account Dr $5000

                                            Debtors account Dr $5000

                                                              To sales account $10000

E.  When company sales the fixed asset worth $5000 in loss of $500 then company will be making following journal entry in the books of accounts –

                                                 Cash account Dr                                 $4500

                                                 Loss on sale of assets account Dr   $500

                                                             To Fixed assets account                $5000

As one can see from that compound entry is passed when more than two accounts are getting affected either on debit or credit side so in simple words if in a single entry more than two accounts are getting affected than it will be called compound journal entry