Making entries in journals is the starting step of learning of accounting process. A journal entry is the record in which transactions are first recorded. Thereafter, they are posted to ledger accounts. Hence, journal entries are called books of original entry.
What does a journal entry reflect?
Journals, being the original records of all transactions, show all details pertaining to it. It shows the date and amount of transaction and the accounts which are debited and credited. Journal also gives brief explanation of every transaction. Entries from journal are transferred to respective ledger accounts.
What is a compound or composite entry?
A compound or composite journal entry is one that affects more than two account heads. A compound journal entry may have one debit and two or more credits. It can also have one credit and two or more debits or a combination of debits and credits. When compared to simple entries, they are tougher to understand.
Beginners in accounting studies often face hardships understanding multiple debits and credits. For this reason, they often search for compound or composite journal entries homework answers.
Difference between simple and composite entries
- Simple entries have only one debit, and one credit whereas compound journal entries have more than one debit or credit or both.
- The amount of debit will match with that of credit in a simple entry, while this is not so in compound entries.
- Simple entries affect only two accounts. Compound entries are combination of several simple entries. Therefore it affects more than two accounts.
Simplifying compound or composite journal entries homework answers
As I have seen students finding it difficult to understand the concepts, let me begin with an example. Suppose a company purchases goods for $1000. It pays half of the amount in cash and half from bank. The resulting journal entry will be as follows:
Purchases a/c Dr (for debit) $1000
To cash a/c Cr (for credit) $500
To Bank a/c Cr (for credit) $500
The above example shows the treatment of compound entries. For a single purchase of $1000, two accounts are credited, cash and bank. Half of the amount i.e. $500 goes out of bank and the other half is paid in cash. Students need to bear in mind that they need to look out for every account that is affected by a transaction.
Important points to remember
As a student venturing into the world of journals and ledgers for the first time, you need to learn your basic concepts thoroughly if you want all compound or composite journal entries homework answers correctly done.
- Always check whether the total of all debits and credits is the same amount. If it is not, time to recheck your answers. You must have gone wrong somewhere.
- Bear in mind the concept of double entry. For every entry of debit, there will be a corresponding credit in some other account.
- In accounting terminology, debits and credits are used differently from personal banking. A debit entry in furniture account will mean an addition to furniture whereas a debit in your account statement means a deduction from your bank balance.
- Although composite entries are combination of several simple entries, take care while combining entries. Totally unrelated transactions cannot be clubbed into a compound entry. For example, you can’t combine a transaction for purchase of land with another for sale of goods.
Reasons behind combining entries
As pointed out before, there are some norms to be followed in making composite entries. You are not allowed to combine simple entries at random and make a compound entry. The major reason for students going wrong in compound or composite journal entries homework answers is the lack of knowledge of reasons why combination is done.
- It is easy for bookkeeping if underlying transactions related to a single event are combined as one entry.
- If depreciation is to be provided on several fixed assets, it can be passed as a single compound entry, debiting depreciation and crediting respective assets.
- For recording salaries, compound entry is generally used, debiting salaries and crediting cash and other deductions.
- A supplier’s invoice may have multiple items like tax and cess apart from amount A compound entry for all items will suffice.
The main point to be borne in mind is that combining entries should spring from a single transaction or should be related to each other.
Is it advisable to take online help?
Today students have the habit of searching on internet for every small and large problem they face. Technology has been found to be of immense use if used judiciously. There are benefits and drawbacks of taking online help.
- Strengthen foundation:
In accounting field, unless your basic concepts are strong, you can’t move ahead. If help is taken from a reliable site, it can help in learning concepts thoroughly.
- Homework help:
Though it is not advisable to run for help in every case, there might be some hard assignments which get on your nerves. Especially in cases like compound or composite journal entries homework answers, getting online help is better if you are unable to cope.
- Get all-round help:
Apart from homework help, several sites have options like practice papers and online quizzes. They help students to practise what they have learned.
- Query resolution:
With a good online help, you can be sure of getting your doubts solved whenever you want. There are sites which provide services all twenty-four hours.
On the flip side, relying too much and too hastily on online help should be avoided. They might prove to be harmful in some cases.
- Deceitful providers:
Beware of fraudulent players who just promise, but never deliver in time. You will end up losing your money.
- Beware of lethargy:
There is a small chance that you might turn lazy and approach for external help instead of trying for yourself. This is a tendency against which you need to guard yourself. Don’t put your books aside if you want a good grade in compound or composite journal entries homework answers.
Self-study together with external help can help you excel in basic accounting lessons.