# Compound entry

Compound entryis an entry involving three accounts or more. If there are only two accounts, one debit and one credit then it is called a simple entry. Nevertheless, many payments require more than two journalizing accounts. Compound entry is also called compound journal entry. In compound entry fundamental requirement is to have all debits ahead of credits. Quantity of debits needs to correspond to amount of credits (J. Weygandt., P. Kimmel., D. Kieso 2018, p. 2-9), (M. Hanif., A. Mukherjee 2018, p. 3-12).

## Example of compound entry

Land and office building bought for $300,000 plus GST (tax 10%). The terms of the agreement called for a$90,000 check deposit, a reminder that 8 percent p.a. would be financed with a 20-year loan bearing interest. The purchase price is given to land $120,000 and to the house$180,000. Land and construction are both heightened and subsequently debited property. The GST(tax) paid shall be debited to the account of GST Outlays. The bank account money is cut down by credit. A lawsuit against the company is the unpaid part of the purchase price. Therefore, a loan raises a risk. While this exchange includes more than two accounts (a combined entry), the sum of the debited dollar amounts is the total of the credited dollar amounts. In conclusion we have on the side of debit: Land for $120000, Building for$180000 and GST(tax) for $30000. Total of debit is$300000. On the credit side we have: Cash at Bank for $90000 and Mortgage Payable for$240000. Total of credit is \$300000. Sum of debit equals credit (J. Hogget., J. Medlin., L. Edwards., M. Tilling., E. Hogg 2012, p. 84).

## Recording the compound entry

There are three ways that you can record a compound entry (P. C. Tulsian., B. Tulsian 2014, p. 22):

• First of all you can debit at least two accounts and credit one account
• Secondly there is a possibility to record compound entry by debiting a couple of accounts and to credit some accounts
• Last but not least there is a formula of crediting at least two accounts and debiting one account

## History of compound entry

Professor Federigo Melis found a compound entry in a 1399 Pisan paper and concluded that, by the second half of the fourteenth century, these entries were a regular feature of Tuscan bookkeeping. In his ledger of 1436-1440, the Venetian Jachomo Badoer included a compound entry. It seems likely that by the sixteenth century, the use of compound entries had become quite common in Italian practice. In comparison, the majority of bookkeeping textbooks of the sixteenth century only illustrated basic journal entries, one debit and one credit. Early researchers preferred to break complicated transactions into two or more basic entries. Yet clearly this was a teaching tool, not the product of ignorance. In Heinrich Schreiber's earliest published German bookkeeping document, "Ayn New Kunstlich Buech" (1518), compound entries are illustrated. The first textbook in English to describe compound entries was "A Breffe Instruction" (1567) by John Weddington. In Holland, in "Hyponmemata Mathematica" (1608), Simon Stevin gave an early and widely imitated exhibition of compound entries. Such textbooks are valuable for examples of compound entities because they represent a shift from the need to provide simple double entry instruction to a concern for consistency in bookkeeping and a desire to reduce clerical work (M. Chatfield., R. Vangermeersch 2014, p. 144).

## References

• Chatfield M., Vangermeersch R. (2014), The History Of Accounting (RLE Accounting): An International Encylopedia, Routledge, New York & London
• Cunningham B., Nikolai L., Bazley J., Kavanagh M., Slaughter G., Simmons S. (2014), Accounting: Information For Business Decisions, Cengage Learning Australia pty limited, p. 186
• Hanif M., Mukherjee A. (2018), Financial Accounting - I, Revised Fourth Edition, Mcgraw-Hill Education (India) private limited, Chennai
• Hogget J., Medlin J., Edwards L., Tilling M., Hogg E. (2012), Financial Accounting, John Wiley & Sons, Australia
• Rajasekaran V., Lalitha R. (2011), Financial Accounting, Pearson, p. 93
• Tulsian P.C., B. Tulsian. (2014), Financial Accounting For B.Com. (Programme), S. Chand Group, New Delhi
• Weygandt J., Kieso D., DeFranco A., Kimmel P. (2005), Hospitality Financial Accounting, John Wiley & Sons, p. 104
• Weygandt J., Kimmel P., Kieso D. (2018), Accounting Principles, John Wiley & Sons, USA

Author: Wiktor Woźny