Journal Entry for Commission Received

Before learning about Journal Entry for Commission Received, we need to understand whats is commission Income.

What is Commission received ?

Commission received refers to the income or revenue earned by an individual or business for providing a service or facilitating a transaction on behalf of another party.

It typically occurs in situations where an agent, broker, or salesperson is involved in selling products, securing deals, or generating business for a client or company.

Commission received is recorded as income in the financial statements and contributes to the overall revenue of the business or individual.
It is usually disclosed separately to provide transparency and clarity on the sources of income generated through commissions.

Journal entry for Commission received ?

The journal entry for commission received depends on the specific circumstances and the accounting practices followed by the business.
However, here is a general example of a journal entry for commission received:

When commission is received:

This journal entry records the increase in the cash or bank balance (debit) and recognizes the commission income earned (credit).

When commission is received in advance:

This journal entry records the increase in the cash or bank balance (debit) and recognizes the liability for unearned commission income (credit).
The unearned commission income is treated as a liability until the services are provided or the transaction is completed.

When commission is earned:

This journal entry recognizes the revenue earned from the commission (credit) and reduces the liability for unearned commission income (debit) that was recorded when the commission was received in advance.

Example #1

Let’s say ABC Company provides sales services and earns a commission of $1,000 from a successful sale:

When commission is received:

This journal entry records the increase in the cash or bank balance by $1,000 (debit) and recognizes the commission income earned by $1,000 (credit).

When commission is received in advance:

This journal entry records the increase in the cash or bank balance by $1,000 (debit) and recognizes the liability for unearned commission income by $1,000 (credit).
This is applicable if the commission is received before the services are provided or the transaction is completed.

When commission is earned:

This journal entry recognizes the revenue earned from the commission by $1,000 (credit) and reduces the liability for unearned commission income by $1,000 (debit).
This is recorded when the services are provided or the transaction is completed.

It’s important to note that the specific accounts used and the amounts recorded may vary based on the accounting system and policies of the company.

Learn more Journal Entries

What is Commission received ?

Journal entry for Commission received ?

Example #1

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