Unit-5 Journal

This unit explains the method of applying the rules of debit and credit to business transactions and how exactly the entries are made.

What is a compound entry? 

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Learning Pundits Content Team

Written on Apr 17, 2019 6:01:52 PM

  • Sometimes, a transaction may involve more than two accounts.
  • Sometimes, there may be more transactions of the same nature taking place on the same date.
  • In such situations if we pass separate journal entries, it may take more time and also require more space.
  • Hence, such transactions may be recorded by means of a single journal entry. Such an entry is called a 'compound journal entry’.

It may be recorded in the following three ways:

  1. By debiting one account and crediting two or more accounts
  2. By debiting two or more accounts and crediting one account
  3. By debiting several accounts and crediting several accounts.


  • a) Paid cash to Ganesh Rs. 490. He allowed Rs. 10 as discount and settled his account. This transaction involves three accounts: (i) Ganesh's Account, (ii) Cash Account, and (iii) Discount Received Account. The journal entry will be:                                                                                            Rs.                     Rs .
  • Ganesh's Account                                  Dr.                       500
  • To Cash Account                                                                                           490
  • To Discount Received Account                                                                     10
  • (Being cash paid to him in full settlement of the account)

b) Sold goods to Rao & Sons Rs. 800 and Sharma Bros. Rs. 500, on May 5, 1987. These two transactions are of the same nature and have taken place on the same date. Their entries can be combined by passing the following compound journal entry:

  •                                                                                             Rs.                  Rs .
  • Rao & Sons Account                              Dr.                       800
  • Sharma Bros. Account                           Dr.                       500
  • To Sales Account                                                                                        1,300
  • (Being sale made)
  • (Being assets and liabilities taken over) 

C) A running business with the following assets and liabilities was purchased from Tularam for Rs. 64,000.

  • Building Rs. 40,000  Furniture Rs. 12,000
  • Stock Rs. 20,000  Creditors Rs. 8,000

The journal entry will be:

  •   Rs.    Rs.
  • Building Account  Dr.  40,000
  • Furniture Account  Dr.  12,000
  • Stock Account  Dr.  20,000
  • To Creditors  8,000
  • To Tularam's Account  64,000
  • (Being assets and liabilities taken over)

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