Bookkeeping – Complex Entries Expanded (Lesson 66)

Lesson 66

A journal entry with multiple lines of entry affecting several different ledgers (accounts) is commonly referred to as a complex entry.   Many bookkeepers shy away from them as they feel intimidated by the difficulty involved and do not want to make an error.   This lesson helps the bookkeeper understand how to break the complex entry down into a series of standard entries.   Once this basic concept is understood, complex entries become easy to create and there is strong sense of achievement once mastered.   This is one of the core differences between accountants and bookkeepers.   Accountants enter complex entries regularly.

This lesson explains how a complex entry is nothing more than a series of standard entries combined together as one.   I illustrate how to break it down into standard entries.   Next,  I provide several illustrations of this method with common economic transactions.   Once done, you will feel greater confidence in your ability to tackle more complicated economic transactions.

Breaking Down a Complex Entry into Standard Entries

A standard entry is a dual entry with two line items.   Each line item is either a debit or a credit.   Once completed all debit values must equal credit values.   A complex entry is simply three or more line items of data.   With three lines, two of them are  debits or credits and the third is a single line for the balance as either a full debit or credit.   Look at a simple entry for a retail store for the sale of a single product and the associated sales tax. 

Sales Journal
Date           ID                   Ledger                  Description                         DR          CR
05/18/16  20160518042   Sales  – Cones        2-Scoops Cone w/Nuts                    2.80

.               20160518042   Sale Tax Payable   6% Sales Tax on Cone                       .17
.               20160518042   Cash                       Total on Sale                      2.97         -0-
.                                                                                                                $2.97     $2.97

Notice that this complex entry is really two simple entries.   One is for the sale of the ice cream cone and the other is for the collection of sales tax.   Look at the two standard entries below:

Sales Journal
Date             ID                  Ledger                   Description                    DR           CR

05/18/16    20160518042   Sales – Cones        2-Scoop Cone                                 2.80
.                 20160518042   Cash                      Sale of Ice Cream Cone  2.80         -0- 
.                                                                                                                2.80        2.80

.                  20160518042  Sales Tax Payable 6% Tax on Sale                                .17
.                  20160518042  Cash                      6% Tax on Sale                 .17           -0- 
.                                                                                                                  .17          .17

Notice that with this transaction the cash is combined as one line item in the complex entry?   This same concept exists with a multiple product sale.   Look at this transaction when a family buys their ice cream at the shop.

Sales Journal
Date            ID                   Ledger                 Description                        DR          CR

05/18/16   20160518043    Sales – Sundaes   Chocolate Sundae                             3.40
.                20160518043    Sales – Cones       3-Scoop Cone w/Choc Dip              3.20
.                20160518043    Sales – Kids          1 Scoop Cup                                    1.10
.                20160518043    Sales – Sundaes    Monster Combo                               4.20
.                20160518043    Sale Tax Payable  6% on Total Sales                              .71
.                20160518043    Cash                      Debit Card Payment        12.61         -0-
.                                                                                                                 12.61     12.61

This complex entry is merely five standard entries combined as one.  All complex entries can be broken down into a standard two line entry (dual entry).   To illustrate this, the next section shows several regular complex entries and how they are merely a combination of standard entries.

Regular Complex Entries

A common entry that is complex and customarily program generated is payroll.   To prepare for this illustration, please reread the following lessons:

Payroll Structure – Lesson 30 
A Simple Payroll – Lesson 31
Payroll Cycles – Lesson 32
Payroll Compliance and Documentation – Lesson 33 

A basic single employee transaction consists of three distinct functions:

1) The employer owes money to the employee;
2) The employee must pay taxes to the government; AND
3) The employer owes taxes to the government too. 

So let’s set-up a single employee payroll and then present all three distinct functions in their own entry form.   Once done,  I’ll combine all three into one master complex entry.

ACME Corporation

ACME hired Mary as the office manager and pays her $600 per week for her services.  The payroll is processed on Wednesday and the check is physically printed on Friday morning for delivery at lunch time.   While waiting to get cut, the net check is suspended in a checking account, contra account, called ‘Payroll Prep’.   The contra account temporarily holds a credit value.   When the final check is printed the debit is to the contra account and the credit is against the checking account (remember checks are customarily credits in cash accounts).

Step 1 – Employer owes money to the employee in this case ACME owes Mary $600.

Payroll Journal
Date         ID                      Ledger                Control ID  Description                      DR          CR

04/06/16  20160416PR14  Mngmnt/Salary   Mary          Mary’s Regular Pay       600.00
.               20160416PR14   Payroll Prep        Mary          Mary’s Regular Pay           -0-      600.00
.                                                                                                                               $600.00 $600.00

Step 2 – Employee must pay taxes.

Mary must pay her share of taxes to the government including income taxes, Social Security, Medicare and state income taxes.   All taxes are withheld and owed to the respective governmental authorities.   The offset is a debit to her $600 contra balance in payroll prep which is payable by ACME.

Payroll Journal
Date        ID                       Ledger               Control ID  Description                     DR            CR

04/06/16 20160416PR14   P/R Taxes Due   941-FED   Mary’s Fed W/H                             81.00
.              20160416PR14   P/R Taxes Due    941-SS     Mary’s SS W/H                               37.20
.              20160416PR14   P/R Taxes Due    941-Med  Mary’s Medi W/H                             8.70
.              2016041PR14     P/R Taxes Due     AL                                                                   17.40

.              20160416PR14   Payroll Prep        Mary        Total W/H Offset to Net  144.30        -0-
.                                                                                                                              $144.30   $144.30

This particular entry is really four standard dual line entries.   Each entry consists of a debit to payroll prep with the control ID of ‘Mary’ and a credit to payroll taxes due with different control ID’s.

A couple of interesting items so far, first Mary’s net paycheck is now the $600 for her gross wages less $144.30 for various taxes.   Her check on Friday is $455.70.   Secondly, the taxes are legally mandated taxes owed.   Remember in payroll the employer must match Social Security and Medicare.   In addition employers are responsible to pay unemployment taxes to both the state (SUTA) and the federal government (FUTA).  This brings us to Step 3.

Step 3– Employer must match and pay taxes.

The employer’s payment or responsibility has nothing to do with Mary’s check balance.  It is just like a bill, debit expense, in this case payroll taxes in the management section of the income statement, and credit payroll taxes due with appropriate control ID’s for the respective tax items.   Here is the entry:

Payroll Journal
Date         ID                       Ledger                 Control ID   Description                   DR           CR
04/06/16  20160416PR14   Mngmnt/Taxes    Mary            SS Match  (Mary)       37.20

.               20160416PR14   Mngmnt/Taxes    Mary            Medi Match (Mary)      8.70
.               20160416PR14   Mngmnt/Taxes    Mary            FUTA (Mary)                3.24
.               20160416PR14   Mngmnt/Taxes    Mary            SUTA (Mary)                7.92
.               20160416PR14   P/R Taxes Due    941-SS         SS Match (Mary)                         37.20
.               20160416PR14   P/R Taxes Due    941-Med      Medicare Match (Mary)                8.70
.               20160416PR14   P/R Taxes Due    940               FUTA (Mary)                                3.24
.               20160416PR14   P/R Taxes Due    SUTA           SUTA (Mary)                 -0-           7.92
.                                                                                                                               $57.06     $57.06

Again the entry consists of four standard entries.   Each entry has a debit to payroll taxes under management costs in the expenses section of the income statement; the credit is entered to the payroll taxes due, a current liabilities account.

Notice that two of the three sets are complex entries anyway?   Now let’s combine all three as one master complex entry.

Payroll Journal
Date         ID                      Ledger                  Control ID    Description                          DR             CR
04/06/16  20160416PR14  Mngmnt/Salary     Mary            Mary’s Weekly Pay         $600.00

.               20160416PR14  P/R Taxes Due      941-FED      Mary’s Fed W/H                                  81.00
.               20160416PR14  P/R Taxes Due      941-SS          Mary’s SS W/H                                   37.20
.               20160416PR14  P/R Taxes Due      941-Medi      Mary’s Medi W/H                                 8.70
.               20160416PR14 P/R Taxes Due       AL                 Mary’s Alabama I/C T                        17.40
.               20160416PR14  Mgmnt/PR Taxes  Mary              SS Match  (Mary)              37.20
.               20160416PR14  Mgmnt/PR Taxes  Mary              Medi Match (Mary)             8.70
.               20160416PR14  Mgmnt/PR Taxes  Mary              FUTA (Mary)                       3.24
.               20160416PR14  Mgmnt/PR Taxes  Mary              SUTA (Mary)                       7.92
.               20160416PR14  P/R Taxes Due      941-SS           SS Match  (Mary)                               37.20
.               20160416PR14  P/R Taxes Due      941-Medi       Medi Match (Mary)                              8.70
.               20160416PR14  P/R Taxes Due      940                 FUTA (Mary)                                       3.24
.               20160416PR14  P/R Taxes Due      SUTA             SUTA (Mary)                                       7.92
.               20160416PR14  Payroll Prep          Mary               Mary’s Net Check Amount   -0-       455.70
.                                                                                                                                       $657.06    $657.06

Debits equal credits as required under the dual entry principle used with bookkeeping.  Can you make out the three distinct functions of the payroll for Mary’s paycheck?   Instead of two entries to the payroll prep account, there is one net amount owed to her.

The next illustration is a common fixed asset purchase.   This economic transaction occurs more frequently than most bookkeepers want to admit.   It is the purchase of a vehicle.

In a simple asset purchase the transaction involves a single price for the asset and the exchange of cash.   But modern day purchases of vehicles involve much more.    There is government involvement by the division or bureau of motor vehicles, sales tax, licensing and insurance too.   Complicating this entire transaction is the fact that a loan is used to complete the purchase.   So in reality there are three distinct functions within this one economic transaction:

1) Purchase of a Fixed Asset
2) Governmental Compliance
3) Use of a Loan to Complete the Sale

Here is the background and the actual distinct transactions. 

ACME Company

ACME needs to expand its service fleet and decides to purchase a 2017 cube truck for $43,000.   ACME has enough excess working capital to put a down payment of $17,000 on the cube truck.   So the balance of the purchase price, taxes and insurance requirements must be funded with a loan.   The following is the deal presented by the dealership:

2017 Cube Truck
Purchase Price                                                  $43,000.00

Sales Tax @ 3.25%                                              1,397.50
Revenue Tax (Local Government) @ .211%            90.73
DMV Title                                                                 75.00
Registration                                                             125.00
Tags                                                                           45.00
Commercial Sticker (2 Years)                                 185.00
Delivery Fee                                                            299.00
Prepaid Insurance  (3 Months by Law)                   419.30
Service Warranty Contract                                    1,235.00
Service Warranty Contract Sales Tax @6%              74.10
One (1) Doggie Bobble-Head Ornament                   Free
Total Cash Purchase Price                                 $46,945.63

Down Payment                                                   (17,000.00)
Financing Required                                            $29,945.63

Step 1  – Record Purchase of Fixed Asset

Fixed Assets Journal
Date           ID                      Ledger           Control ID     Description                    DR                   CR

10/18/16    201610189642   F/A – Trucks  ZZX-1776     F450-Cube #9116     43,000.00
.                 201610189642   F/A – Trucks   ZZX-1776     Sales Tax #9116         1,397.50
.                 201610189642   F/A – Trucks   ZZX-1776     Delivery Fee #9116       299.00
.                 201610189642   F/A – Trucks   ZZX-1776     Rev Tax #9116                90.73
.                 201610189642   F/A – Trucks   ZZX-1776     Title #9116                      75.00
.                 201610189642   A/P                 Ford Dlrshp   F450 Cube Truck             -0-            44,862.23
.                                                                                                                           $44,862.23     $44,862.23

Take note that the sales and revenue tax are a state and local government tax to purchase a long-life asset.   This entitles ACME to own the asset.   The $75.00 title fee provides them with a title – proof of ownership.   The other governmental items are operational based and allows ACME to legally use the truck on the road for a given period of time; therefore, those other fees are not a fixed asset value but are recorded differently.   Here is the entry:

Step 2 – Governmental Compliance to Operate the Vehicle

Fixed Assets Journal
Date         ID                     Ledger                Control ID     Description                      DR            CR
10/18/16  201610189642 Trans/Licenses    ZZX-1776      F45040116 Regist        125.00

.               201610189642  Trans/Licenses    ZZX-1776     F450 #9116 Tags            45.00
.               201610189642  Prepaid Expense  F450 #9116  Com Stckr                     185.00
.               201610189642  Prepaid Expense  F450 #9116  3 Mnts In                       419.30
.               201610189642  Warranties            ZZX-1776    #9116 Srv Warranty    1,309.10
.               201610189642   A/P                      Ford Dlr       F450 Cube Truck #9116    -0-        2,083.40
.                                                                                                                               $2,083.40  $2,083.40

Combined, the two entries equal $46,945.63 which is the dollar value of the deal.   Step 2’s entry also includes the warranty item which is a long-term protection agreement.  Notice the warranty cost and its sales tax ($74.10) are combined?   It saves another line of data entry.   Customarily the warranty is located in the ‘Other’  assets section of the balance sheet.

A pause for the cause is necessary at this point.   There are four items requiring allocation over an operational period of time.

1) Fixed Asset – Depreciation is used to allocate the entire $44,862 over the expected life of the cube truck.
2) Commercial License – The $185 fee is amortized (the license is not a tangible asset; therefore it is amortized) over the two years of application.
3) Prepaid Insurance – The insurance premium is amortized over three months.
4 ) Warranty – The warranty premium is amortized over the period of coverage found in the warranty agreement.

Some accountants will include the first month’s allocation in this complex entry.   I do not endorse this method.   The entry is focused on the purchase of the asset.   Create separate entries for each of the four allocation items above and use the recurring entry feature to save time in the future.

Now onto the last step.   Notice that in both entries I used the accounts payable to indicate that ACME owes the Ford Dealership $46,945.63 combined.   To pay for the truck, ACME got a loan from its bank for the balance after depositing $17,000.   Here is the entry to pay for the truck:

Step 3 – Final Payment

Fixed Assets Journal
Date          ID                     Ledger                Control ID      Description                    DR               CR

10/18/16  201610189642   Accounts Pay     Ford Dlrshp   Payoff F450 #9116    46,945.63
.               201610189642   Cash                    10471            Ck #10471 F450                              17,000.00
.               201610189642   Cube Truck Note Main St.        Bank Note                     -0-              29,945.63
.                                                                                                                              $46,945.63    $46,945.63

Just like warranties, the principle amount is amortized over the life of the loan.  Typically banks provide an amortization schedule with the loan documents. 

The purchase of the cube truck has three distinct entries, the purchase/ownership of the actual asset, the governmental compliance and finally, financing of the purchase.   All three entries are complex; but here is the master entry.

Fixed Assets Journal
Date          ID                      Ledger              Control ID     Description                            DR               CR
10/18/16   201610189642   F/A – Trucks     ZZX-1776     F450 Cube #9116             43,000.00

.                201610189642   F/A – Trucks     ZZX-1776      F450 #9116 Sales Tax        1,397.50
.                201610189642   F/A – Trucks     ZZX-1776      F450 #9116 Delivery            299.00
.                201610189642   F/A – Trucks     ZZX-1776      F450 #9116 Rev Tax               90.73
.                201610189642   F/A – Trucks     ZZX-1776      F450 #9116 Title                     75.00
.                201610189642   Trans/Licenses  ZZX-1776      F450 #9116 Registra             125.00
.                201610189642   Trans/Licenses  ZZX-1776      F450 #9116 Tags                     45.00
.                201610189642   Prepaid Expenses                     F450 #9116 Com Stckr         185.00
.                201610189642   Prepaid Expenses                     F450 #9116 3 Mnths In         419.30
.                201610189642   Warranties         ZZX-1776      F450 #9116 Srvc War          1,309.10
.                201610189642   Cash                  ZZX-1776      F450 #9116 CK#10471                          17,000.00
.                201610189642   Cube Truck Note                      F450 #9116 Note #40051       -0-           29,945.63
.                                                                                                                                       46,945.63   $46,945.63

Notice the doggie bobblehead is not included in the economic record?   When something is free, accountants don’t record the information :).  

In reality these types of complex entries are further compounded by banking requirements.  In real estate transactions banks demand several due diligence documents including surveys, engineering reports, plat documentation, appraisals and a host of other costs.  So you can see that the above complex entry is simple in comparison to other types of entries.   But just like the above, the entry can be broken down into core components.

If interested in reviewing a real estate complex entry, Read: Amortization of Financing Costs in the accounting section of this website. 

Other Types of Complex Entries

Most complex entries are not as convoluted as an asset purchase or real estate closing.  Most are straight forward with several entry lines for either debits or credits with a single offset to the opposite side.  All of them will require some thought input to make sure the entry is error free.  The following are examples of some more common complex entries.

* Loan Payments – Loan payments typically have three lines of information:
.       1) the interest for the period,
.       2) principle portion of the debt payment and
.       3) the credit to checking for the payment.

* Asset Sales – When a fixed asset is sold several items of data require entry including sales price, cash received, removal of the fixed asset and elimination of the accumulated depreciation taken to date.

* Discounted Payments – Many small businesses offer discounts on early payments for client accounts.   Naturally the cash account is debited for the cash received (less than the invoice amount); the accounts receivable is credited for the full amount of the invoice and the difference (a third line of data) is a debit to a discounts account in the capital section of expenses.   This is explained in great detail in the advanced section of bookkeeping.

* Job/Project Accounting – Each bill is broken out into several line items with phase codes assigned.   The construction industry uses a work in process (progress) costing concept and a corresponding percentage of completion or completed contract method to account for revenue and costs assigned to the income statement.   In effect, this type of cost accounting utilizes complex entries on a daily basis.

* Payroll Tax Payments – A standard 941 payment comprises the tax components of five different taxes:
.      1) Income taxes withheld from the employee;
.      2) Social Security taxes withheld from the employee;
.      3) Medicare taxes withheld from the employee;
.      4) Employer matching taxes for Social Security; AND
.      5) Employer matching taxes for Medicare.

There are many others and this could continue for pages, but you get the idea.


When multiple lines of information are required for an entry and the lines affect different accounts or control ID’s the entry is referred to as a complex entry.   To prevent being overwhelmed by the complexity, break the entry down into its core components.   Once the bookkeeper understands the core entries it becomes easier to understand and appreciate the sophistication of a complex entry.   ACT ON KNOWLEDGE.

If you have any comments or questions, e-mail me at dave (insert the usual ‘at’ symbol)  I would love to hear from you. If interested in my services as an accountant/consultant; click on ‘My Services in the footer of this article. 

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About David J Hoare 429 Articles

I spent 12 Years as a Certified Public Accountant,
Over 20 Years of Practice in Accounting and Consulting,
Controller in Management of Closely Held Operations,
Masters of Science in Accounting,
Prepared over 1,000 Business Tax Returns and Hundreds of Individual Returns