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Sapna Takia

What is journal entry for commission received?

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1 Answer

  1. Commission Received refers to a percentage amount received by the company (or) an individual on the total sales incurred. It is an indirect income/revenue recorded on the credit side of profit and loss account. The term “commission” is more likely used in the stock market which is paid to a broker on the sale of shares (or) securities.

    Journal Entry for Commission Received

    Nowadays many organization uses a bank account for every business transaction i.e., either to make or receive payment. The journal entry on the commission received can be recorded in two different approaches of accounting. They are

    1. Traditional Accounting Approach

    ParticularsL.F.AmountNature of AccountAccounting Rule
    Bank a/c XXXPersonalDebit- The Receiver
     To Commission Received a/c  XXXNominalCredit- All Incomes and Gains

    (Being commission received)

    2. Modern Accounting Approach

    ParticularsL.F.AmountNature of AccountAccounting Rule
    Bank a/c XXXAssetDebit- The Increase in Asset.
     To Commission Received a/c  XXXIncomeCredit- The Increase in Income.

    (Being Commission received)

    Example

    On 1st March, Anna Ltd. received a commission amounting to 70,000 through cheque. Journalise the following transaction.

    DateParticularsL.F.AmountNature of AccountAccounting Rule
    1st MarchBank a/c 70,000AssetDebit- The Increase in Asset
      To Commission Received a/c  70,000IncomeCredit- The Increase in Income.

    (Being commission received through cheque)

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