Compound/Combined Journal Entry

A journal entry involving more than 2 Account Heads (Elements) is called a compound/combined journal entry. Journal in the books of M/s __ for the period from ____ to _____ Date V/R No. Particulars L/F Debit Amount (in Rs) Credit Amount (in Rs) June 15th – Bank a/c Discount a/c       To Raghavan a/c [Being the amount due from Raghavan collected by giving him a discount] Dr – – – 1,950 50 2,000 • 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. Writing a compound/combined entry in place of two or more simple entries reduces the task involved in recording the transactions.

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 June15th: Paid Rent in Cash Rs. 8,000 June15th: Paid Telephone Charges in Cash Rs. 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 _____ Date V/R No. Particulars L/F Debit Amount (in Rs) Credit Amount (in Rs) June 15th – Rent Paid a/c       To Cash a/c [Being the amount paid towards rent in cash.] Dr – – 8,000 8,000 June 15th – Telephone Charges a/c       To Cash a/c [Being the amount paid towards telephone charges in cash ] Dr – – 1,280 1,280 » Recording using Simple Compound/Complex 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 _____ Date V/R No. Particulars L/F Debit Amount (in Rs) Credit Amount (in Rs) June 15th – Rent Paid a/c Telephone Charges a/c       To Cash a/c [Being the amount paid towards rent and telephone charges in cash ] Dr – – – 8,000 1,280 9,280

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. The postings relating to the entry in the above example would be as follows in the relevant accounts. Dr Rent Paid a/c Cr Date Particulars J/F Amount (in Rs) Date Particulars J/F Amount (in Rs)                 15/06/05 To Cash a/c – 8,000                         Dr Telephone Charges a/c Cr Date Particulars J/F Amount (in Rs) Date Particulars J/F Amount (in Rs)                 15/06/05 To Cash a/c – 1,280                         Dr Cash a/c Cr Date Particulars J/F Amount (in Rs) Date Particulars J/F Amount (in Rs)                           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 compared to recording the entries separately. • Illustrative Explanation Having purchased goods on credit, the organisation is due to Mr. Mahender to the extent of Rs. 5,000. Credit period allowed is 2 months, and the due date of payment is July 15th. 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 Rs. 200 on the amount due. The organisation took up the offer and paid up in cash Rs. 4,800. There are two transactions involved here. Paying Rs. 4,800 cash to Mr. Mahender Receiving a discount of Rs. 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 Rs. 4,800. Received discount from Mr. Mahender Rs. 200 Journal in the books of M/s __ for the period from ____ to _____ Date V/R No. Particulars L/F Debit Amount (in Rs) Credit Amount (in Rs) June 15th – Mr. Mahender a/c       To Cash a/c [Being the amount paid in cash to Mr. Mahender on account ] Dr – – 4,800 4,800 June 15th – Mr. Mahender a/c       To Discount Received a/c [Being the amount of discount received from Mr. Mahender ] Dr – – 200 200 » Recording using Simple Compound/Combined Entries The two transactions can be combined and recorded using a simple compound/complex journal entry Paid to Mr. Mahender Rs. 4,800 in full and final settlement of the amount due to him of Rs. 5,000 (Or) Paid Rs. 4,800 to Mr. Mahender and discount received from him Rs. 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 _____ Date V/R No. Particulars L/F Debit Amount (in Rs) Credit Amount (in Rs) June 15th – Mr. Mahender a/c       To Cash a/c       To Discount Received a/c [Being the amount paid to Mr. Mahender in cash and the discount received from him on account ] Dr – – – 5,000 4,800 200 » 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. Dr Mahender a/c Cr Date Particulars J/F Amount (in Rs) Date Particulars J/F Amount (in Rs)                 15/06/05 15/06/05 To Cash a/c To Discount       Received a/c – – 4,800 200                         Dr Cash a/c Cr Date Particulars J/F Amount (in Rs) Date Particulars J/F Amount (in Rs)                         15/06/05 By Mahender a/c – 4,800                 Dr Discount Received a/c Cr Date Particulars J/F Amount (in Rs) Date Particulars J/F Amount (in Rs)                         15/06/05 By Mahender a/c – 200

Author Credit : The Edifier

... Continued Page 24