What is journal entry for commission received?

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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 the 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

Particulars L.F. Amount Nature of Account Accounting Rule
Bank a/c XXX Personal Debit- The Receiver
 To Commission Received a/c  XXX Nominal Credit- All Incomes and Gains

(Being commission received)

 

2. Modern Accounting Approach

Particulars L.F. Amount Nature of Account Accounting Rule
Bank a/c XXX Asset Debit- The Increase in Asset.
 To Commission Received a/c  XXX Income Credit- 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.

Date Particulars L.F. Amount Nature of Account Accounting Rule
1st March Bank a/c 70,000 Asset Debit- The Increase in Asset
 To Commission Received a/c  70,000 Income Credit- The Increase in Income.

(Being commission received through cheque)