A compound journal entry is an accounting entry in which there is more than one debit, more than one credit, or more than one of both debits and credits. It is essentially a combination of several simple journal entries; they are combined for either of these reasons:
- It is more efficient from a bookkeeping perspective to aggregate the underlying business transactions into a single entry. Examples of aggregation that may involve compound journal entries are:
- All of the debits and credits relate to a single accounting event. Examples of accounting events that frequently involve compound journal entries are:
- Record all payments and deductions related to a payroll
- Record the account receivable and sales taxes related to a customer invoice
- Record multiple line items in a supplier invoice that relate to different expenses
- Record all bank deductions related to a bank reconciliation
An example of a compound journal entry is a payroll entry, where there is a debit to salaries expense, another debit to payroll taxes expense, and credits to cash and a variety of deduction accounts.
Standard journal entry templates are routinely constructed for compound journal entries, so that they can be consistently generated in each reporting period.