Compound Journal Entries
What are Compound Journal Entries?
Compound journal entries are entries that involve three or more entries in the one transaction.
How it Works
Most accounting entries involve one credit entry and one debit entry, only.
The credit entry shows where money or value came from.
Then the debit entry shows where that money or value was used or where it went to.
Often, though, a transaction will involve more than just one debit and one credit entry.
This could happen if a business pays an invoice for office supplies.
To record details of the transaction, you would credit the cash account.
This would show that money has come from the bank.
After this, you need to show what the money was used for.
In this case, the payment pertains to two expenses.
So to record the other side of the transaction, you debit the office supplies account.
This shows part of the payment was used for office supplies.
At the same time, you also debit the freight account.
This shows part of the payment was used to get the office supplies delivered.