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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
(Being commission received)
2. Modern Accounting Approach
(Being Commission received)
Example
On 1st March, Anna Ltd. received a commission amounting to 70,000 through cheque. Journalise the following transaction.
(Being commission received through cheque)