Compound Journal Entry

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on June 13, 2023

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:

  • The date of the transactions being compounded should be the same
  • 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

Compound Journal Entry FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.