Q:

What is a compound entry?

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Quick Answer

According to Accounting Tools, a compound entry is a type of data entry in which multiple journal entries of credits and debits are combined into one entry. These types of entries are commonly used when the original journal entries come from the same event. They are also used when the business transactions related to the entries are more efficiently understood as an aggregate of similar entries.

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Full Answer

Accounting entries consist of debits, which are a marked increase in an asset or expense account, and credits, which are marked increases in a liability or equity account. Any single journal entry which combines multiple credits, multiple debits or a combination of more than one of either of the two, is considered a compound entry.

There are a number of reasons that an accounting firm or the accounting department of a corporation might choose to use compound entries instead of standalone entries. When standalone entries would provide disorganized and inefficient methods of bookkeeping for a series of events, such as the accrual or depreciation of an asset, compound entries are used instead. Compound entries are also used when multiple credits and debits stem from a single event. Examples of these types of compound entries include a list of all payroll expenses, all invoices related to a single customer transaction and all reductions from a bank reconciliation.

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