Double-entry & Compound entry
What is Double-entry and Compound Entry?
Double-entry bookkeeping mandates that every financial transaction affects at least two accounts in balanced equal debit and credit sides. Entries involving exactly two accounts are Simple Entries, while entries involving three or more accounts are Compound Entries.
Simple Entry vs Compound Entry
1. Simple Entry (Two Accounts)
Affects exactly two accounts: one debit and one credit for the exact same amount.
Example: "Paid shop rent $2,000 cash"
- Debit: Rent Expense ($2,000)
- Credit: Cashbox ($2,000)
2. Compound Entry (Three or More Accounts)
Affects more than two accounts across the debit or credit sides while maintaining overall balance.
Example: "Sold goods to customer Samer for $3,000: collected $1,000 cash and $2,000 on credit"
- Debits (2 accounts): Cashbox ($1,000) + Accounts Receivable ($2,000)
- Credit (1 account): Sales Revenue ($3,000)
- Total Debits ($3,000) = Total Credits ($3,000)
Frequently Asked Questions
A Simple Entry consists of one debit account and one credit account (e.g. paying rent in cash). A Compound Entry involves multiple accounts on the debit or credit side (e.g. a sale paid partly in cash and partly on credit by a customer), while preserving total debit equals total credit.
No. In accounting, a single-account entry does not exist. Every transaction must impact at least two accounts to maintain ledger balance.
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