Simple Compound/Combined Journal Entry

Simple Journal Entry

A journal entry involving only 2 Account Heads (elements) is called a simple journal entry.

One of the elements/accounting heads is debited and the other credited.

Most of the journal entries that we have come across till now are simple journal entries only.

Journal in the books of M/s __ for the period from ____ to _____
Particulars Amount
(Dr)
Credit
(Cr)
Furniture a/c
To Cash a/c
Dr 15,000
15,000
[Being the amount paid in cash towards purchase of Furniture.]

Compound/Combined Journal Entry

A journal entry involving more than 2 Account Heads (Elements) is called a compound/combined journal entry.

There are two kinds of compound/combined journal entries

  • Simple

    A simple compound/combined Journal Entry is a journal entry involving 3 or more Account Heads in which there are either multiple debits or multiple credits and not both.
    Journal in the books of M/s __ for the period from ____ to _____
    Particulars Amount
    (Dr)
    Amount
    (Cr)
    Rent Paid a/c
    Telephone Charges a/c
    To Cash a/c
    Dr
    Dr
    8,000
    1,280


    9,280
  • Complex

    A complex compound/combined Journal Entry is a journal entry involving more than 3 Account Heads (elements) in which there are multiple debits and multiple credits.
    Journal in the books of M/s __ for the period from ____ to _____
    Particulars Amount
    (Dr)
    Amount
    (Cr)
    Cash a/c
    Motor Car a/c
    Furniture a/c
          To Bank Loan a/c
    To Capital a/c
    Dr
    Dr
    Dr
    50,000
    1,00,000
    20,000



    50,000
    1,20,000

Simple Compound/Combined Journal Entry

A simple compound/combined Journal Entry is a journal entry involving 3 or more Account Heads in which there are either multiple debits or multiple credits and not both.

Illustrative Explanation

Consider the following transactions
  • Paid Rent in Cash 8,000
  • Paid Telephone Charges in Cash 1,280

Recording using Simple Journal Entries

These transactions can be recorded using simple journal entries as:
Journal in the books of M/s __ for the period from ____ to _____
Particulars Amount
(Dr)
Amount
(Cr)
Rent Paid a/c
To Cash a/c
Dr 8,000
8,000
[Being the amount paid towards rent in cash.]
Telephone Charges a/c
To Cash a/c
Dr 1,280
1,280
[Being the amount paid towards telephone charges in cash ]

In combining the above two entries we are interpreting the transaction as

  • Paid Cash 9,280 towards Rent 8,000 and Telephone Charges 1,280

Recording using Simple Compound/Combined Journal Entry

The same transactions can also be recorded using simple compound/combined journal entry as:
Journal in the books of M/s __ for the period from ____ to _____
Particulars Amount
(Dr)
Amount
(Cr)
Rent Paid a/c
Telephone Charges a/c
To Cash a/c
Dr
Dr
8,000
1,280


9,280
[Being the amount paid towards rent and telephone charges in cash ]

Isn't it a violation of the dual entity concept?

The compound/combined entries should not be interpreted to mean that more than 2 elements are effected in a single/simple accounting transaction.

A compound/combined entry is a journal entry derived by combining two or more simple journal entries. The compound/combined entry can always be broken down into the constituent simple journal entries.

Posting the Compound/Combined Entry

Posting the compound/combined entry into the ledger can be viewed as posting the two or more simple entries that form the compound/combined entry.
Journal in the books of M/s __ for the period from ____ to _____
Particulars Amount
(Dr)
Amount
(Cr)
Rent Paid a/c
Telephone Charges a/c
To Cash a/c
Dr
Dr
8,000
1,280


9,280
[Being the amount paid towards rent and telephone charges in cash ]

The postings relating to the above entry, in the relevant accounts, would be as follows.

Rent Paid a/c
Dr Cr
Particulars Amount Particulars Amount
To Cash a/c 8,000    
       
Telephone Charges a/c
Dr Cr
Particulars Amount Particulars Amount
To Cash a/c 1,280    
       
Cash a/c
Dr Cr
Particulars Amount Particulars Amount
  By Rent Paid a/c
By Telephone Charges a/c
 
8,000
1,280

Compound/Combined Entries make tasks simpler !!

Apart from reducing the work involved in writing the Journal Entries, Compound/Combined entries sometimes give a better understanding of the transactions compared to recording the entries separately by ensuring that all the related information is placed together.

Illustrative Explanation

Having purchased goods on credit, the organisation is due to Mr. Mahender to the extent of 5,000. Credit period allowed is 2 months, and the due date of payment is a month away.

Mr. Mahender in need of cash asks the organisation if they would be able to pay up in advance. To motivate them into paying in advance he offered them a discount of 200 on the amount due. The organisation took up the offer and paid up in cash 4,800.

There are two transactions involved here.

  1. Paying 4,800 cash to Mr. Mahender
  2. Receiving a discount of 200 from Mr. Mahender.

Recording using Simple Entries

The two transactions can be considered separately and recorded using two simple journal entries
  • Paid Cash to Mr. Mahender on account 4,800.
  • Received discount from Mr. Mahender 200
Journal in the books of M/s __ for the period from ____ to _____
Particulars Amount
(Dr)
Amount
(Cr)
Mr. Mahender a/c
To Cash a/c
Dr 4,800
4,800
[Being the amount paid in cash to Mr. Mahender on account ]
Mr. Mahender a/c
To Discount Received a/c
Dr 200
200
[Being the amount of discount received from Mr. Mahender ]

Recording using Simple Compound/Combined Entries

The two transactions can be combined and recorded using a simple compound/combined journal entry
  • Paid to Mr. Mahender 4,800 in full and final settlement of the amount due to him of 5,000
    (Or) Paid 4,800 to Mr. Mahender and discount received from him 200.

Since the two transactions are related and happen together, it would be convenient combining the two and interpreting them as a single transaction, both for the purpose of understanding as well as for recording.

Journal in the books of M/s __ for the period from ____ to _____
Particulars Amount
(Dr)
Amount
(Cr)
Mr. Mahender a/c
      To Cash a/c
To Discount Received a/c
Dr 5,000
4,800
200
[Being the amount paid to Mr. Mahender in cash and the discount received from him on account ]

Ledger Postings

The postings would be the same irrespective of whether the recording has been done using a simple journal entry or a simple compound/complex journal entry.
Mahender a/c
Dr Cr
Particulars Amount Particulars Amount
To Cash a/c
To Discount Received a/c
 
4,800
200
   
Cash a/c
Dr Cr
Particulars Amount Particulars Amount
By Mahender a/c
 
4,800
Discount Received a/c
Dr Cr
Particulars Amount Particulars Amount
By Mahender a/c
 
200