Track 2 · Recording and posting
Compound journal entries
Record transactions that touch three or more accounts — loan repayments with interest, part-paid sales, payroll and asset purchases.
You will be able to
- Recognise transactions that affect more than two accounts.
- Record them as one balanced compound entry.
- Check a compound entry for balance and completeness.
Builds on
Many transactions affect more than two accounts. A compound entry records them together: several debits, several credits, one total. It is still one transaction with one date and one source document — it simply has more than two lines.
A loan repayment is the classic example. On 30 June Northgate Bank collects 1,620 from Lumen: 120 is June's interest — the cost of borrowing for the month — and 1,500 is the first quarterly instalment, which reduces the amount owed. One payment, three accounts. Recording it as two separate entries would work arithmetically, but one entry keeps the link to the bank's notice and makes the split obvious to anyone reviewing it.
How to build one. Work from the source document, not from memory: 1. List every account the transaction changes. Ask separately: what did we give up or take on? and what did we get or use? 2. Decide the side for each, using normal balances: assets and expenses increase with debits; liabilities, equity and revenue increase with credits. 3. Put an amount on every line, then check that total debits equal total credits. 4. Check completeness: does every amount on the document appear somewhere? A part-paid sale has a cash part and a receivable part; a salary run has a paid part and an amount still owed.
Common traps. Treating loan principal as an expense (it isn't — it's a repayment of a liability). Recording only the cash part of a sale and forgetting the receivable. Using one total figure where the document shows two different things, such as the selling price and the cost of goods sold. A compound entry that balances can still be wrong, so the completeness check matters as much as the arithmetic.
Lumen's books. Every Lumen figure in this track comes from one continuous set of books — the company you met in Track 1, which started trading on 1 April 2026. Its May balances become June's opening balances, and the trial balance, adjustments and closing entry later in the track are the same ledger at 31 May and 30 June.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 30 Jun | 2500Bank loan | 1,500.00 | |
| 7000Interest expense | 120.00 | ||
| 1000Cash at bank | 1,620.00 | ||
| Northgate Bank: quarterly instalment 1,500 and June interest, direct debit | |||
Interest is an expense of June. Principal isn't an expense at all — it's the repayment of money borrowed, so the Bank loan falls from 18,000 to 16,500.
On 14 May Lumen buys a camera kit for product photography (4,320) and 330 of backdrop paper from Shutterline Pro Supply, invoice SPS-0912. It pays 1,500 on collection; the rest is on 30-day terms.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 14 May | 1500Equipment | 4,320.00 | |
| 1350Supplies | 330.00 | ||
| 1000Cash at bank | 1,500.00 | ||
| 2000Accounts payable | 3,150.00 | ||
| Shutterline invoice SPS-0912: camera kit and backdrop paper; part paid | |||
Two debits (4,650) and two credits (4,650). The camera is equipment because it will be used for years; the backdrop paper is supplies that will be used up soon. Lumen pays the 3,150 balance on 12 June.
Practice
Practising as a guest — attempts aren't saved.
Exercise 1 · Journal entry
On 30 September Northgate Bank collects Lumen's second quarterly loan payment of 1,610 by direct debit. The bank's notice shows a principal instalment of 1,500 and September interest of 110 (the balance is now lower, so interest is too). Record the payment.
Exercise 2 · Journal entry
On 5 May Lumen hands Brightwater Café a finished branding project and invoices 5,000 (LDS-0006). The café pays 2,000 on the spot and will pay the rest within 30 days. Record the entry.
Exercise 3 · Journal entry
Lumen pays Maya and Theo every other Friday for the working days up to that Friday, at 300 a day for the two of them. At 30 June it accrued 600 in Salaries payable for 29–30 June. On Friday 10 July it pays 3,000 for the ten working days from 29 June to 10 July. Lumen doesn't use reversing entries. Record the 10 July payment.
Exercise 4 · Journal entry
Thistle Bakery buys a delivery van for 30,000, paying 5,000 in cash and financing 25,000 with a four-year bank loan. Record the purchase.
Exercise 5 · Accounting equation
What is the overall effect of Thistle's van purchase (30,000 van; 5,000 cash; 25,000 bank loan) on the accounting equation?
Exercise 6 · Calculate
A bookkeeper's draft entry for one supplier invoice reads: Dr Equipment 12,000; Dr Supplies 800; Cr Cash at bank 4,000; Cr Accounts payable ____. The invoice says a 4,000 deposit was paid and the balance is due in 30 days. What amount completes the entry?
Exercise 7 · Journal entry
Corvid Cycle Repairs also sells spare parts, using a perpetual inventory system. On 18 June it sells a batch of parts on credit to a courier firm for 8,000; they had cost Corvid 5,200. Record the sale and its cost in a single entry.
Exercise 8 · Journal entry
Challenge: on 26 May Tidewater Yoga transfers 3,750 to Lumen. Its remittance advice says: "2,750 settles invoice LDS-0005 (brand refresh, delivered 27 April). 1,000 is the deposit for our new class timetables." Lumen will design the timetables in June. Record the receipt.
Key points
- A compound entry records one transaction that affects three or more accounts — still one date, one document, debits equal credits.
- Split repayments into interest (expense) and principal (reduction of the liability).
- Check completeness as well as balance: every amount on the document must land somewhere.
- A sale under a perpetual system has two parts: selling price and cost.
Content review: answers and figures are checked by automated tests against the accounting engine, and the text has had an internal review against the standards; independent review by a qualified accountant is pending.