Commission Received In Advance Effect On Accounting Equation
When you received commission in advance then it represents a Current Liability for your business to render services to the company paid commission in advance to your company. In such case two accounts are involved. One is Commission Received In Advance (CRA) and other one is cash account. CRA is a current liability which is increasing so it affects the liability & equity side (right side) of the Accounting Equation (AE) . Cash is also increasing which increases the assets side (left side) of accounting equation. For example, a company received commission of $1,000 from company B for performing the uncompleted portion of the project. Show the effect of this transaction on Accounting Equation. This is a Business Transaction in which two parties are involved i.e., Company A and Company B. Company A is received commission from Company against the services yet to be performed. From the point view of business of Company A, cash is increasing by $1,000 as it is coming into the busi...