What is Commission Account

It is a remuneration, compensation or fees received by sales manager, broker or an agent from the company against the services rendered. For Example, a sales manager provides his / her services to sell the products to customers through various methods such as through Email Marketing, phone calls, advertisements, blogging and other ways and hence earned commission on meeting sales targets. Usually, whenever a purchase is made, then he / she earns a percentage on Sales made as a commission.

Commission may be on sales basis or on performance basis depending upon the strategy adopted by the Management of the sales department of the company.

Commission Account is an operating expense for the company and it is recorded in the Income Statement at the end of the accounting. However, it doesn’t have any balance as it is a Temporary Account.

 

According to the Rules of Debit And Credit, we debit it, when it incurs and credit it when it is closed to Income Statement.

Commission Journal Entry

When it incurs, the following Journal Entry is recorded in the Book or Journal of company paid it to m as shown below:

                                                     Commission a/c  XXX

                                                                              Cash a/c  XXX

                                                     (Commission Paid To Sales Manager)