Journal Entry for Commission Received

Companies do many works while some jobs are for profits while some works are on a commission basis, work on commission implies that company does the task and it receives a commission for the work completed. In the books of accounts of the company, journal entries have to be passed for commission received, the commission can be received by the company either in cash or on an accrual basis. Given below is the journal entry for commission received –

Commission Received in Cash

When commission is received in cash by the company then following journal entry will be passed –

                                    Cash or bank account Dr

                                        To commission received account

In the above journal entry according to accounting principle of debit what comes in cash or bank account is debited as cash has come into the business and commission received account is credited as it an income for the company and hence credit all income and gains principle of accounting is followed.

Commission not received in cash

When commission is not paid in cash then following journal entry will be passed –

Accrued commission account Dr

                            To commission received account

In the above journal entry accrued commission account is debited as the company has not received commission and it’s outstanding and since accrued commission is asset debit any increase in asset principal of accountancy is followed. In the balance sheet, this accrued commission will be shown on the asset side of the balance sheet and commission received will be shown as income in profit and loss account.

For example, if the company has done $10000 worth of job and commission is 5 percent than the company will receive $500 as commission, now if the commission is not paid to the company than this $500 will be shown as an asset in balance sheet of the company as accrued commission is classified as outstanding income.