The Commission received journal entry is the record showing the accrued commission. Once every three months, commission rates of five per cent are paid based on the value of goods sold (quarterly). For instance, the furniture of Y Company is sold by X Company, a dealer. The corporation Y uses X as an agent.
A hundred pieces of furniture worth a total of Rs. Fifty thousand in sales were made by X firm this month. The amount of commission due is 5% of Rs. 50,000, or Rs. 2,50,000. To accrue the commission receivable for the current month, X debits the receivable and credits the income account with Rs. 2,50,000.
A type of income is the general ledger (GL), which is commission receivable. Before recording those in the books of accounts, the entity needs to confirm that it will receive the commission. The term “commission received” refers to the portion of total sales that the business or an individual got. It is indirect earnings or revenue recorded on the profit and loss account’s credit side. The term “commission,” which is money paid to a broker on selling shares or securities, is more frequently used in the stock market.
How do you enter commission receivables?
1. Journal entry for commission accrual
Commission accrual is also known as a commission receivable account. The GL accounts make up the nature of the transaction. The Commission Income Account is fictitious, whereas the Commission Receivable Account is a true account.
The next step is to locate the pertinent accounting rules to record the journal entries. The following guidelines apply:
- A real account is where the amount received is debited to the account, and what is spent is credited to the account.
- The nominal account should be debited for expenses and losses and credited for any earnings and gains.
2. Commission Receipt Journal Entry
Here, the commission receipt journal entry is used to document the sum of funds received from the sale. Thus, the related general ledger accounts are the bank account (real account) and the commission account (Real Account). The accounting principles outlined in the Real Accounts book are also applicable.
Commissions due: An asset or a source of income?
Since money will be coming in, commission-received journal entries are an asset in the general ledger. When money is received or paid, the bank account is affected. A parking account for a bank account is this Commission Receivable GL.
With the due date falling later, there may be a delay in receiving payments. One must ensure that accounting is done for this transaction even though there are currently no cash receipts. This can be compared to a credit sale.
Is the Commission due a credit or a debit?
An asset is a commission receivable. As a result, they will debit the Commission Receivable account and credit the Commission Income account to boost the asset balance.
Following the Golden Accounting Principles, people must debit what comes in and credit what leaves. There will be a Commission due. So it is acceptable to debit the Commission receivable.
A commission received journal entry is needed to record an asset and income. To put it another way, this is to record using accrual accounting. The date of receipt will be delayed. However, it must document the transaction as it happens. Since commission receivable is a genuine account, it will be on the debit side of the book entry, while Commission Income will be on the credit side.