Commission received journal entry

Commission received journal entry

The remuneration that an agent gets for the services rendered by him is called commission. Usually, the commission is received at the rate of a certain percentage on the sale.An entry is made in the journal for the commission received as follows:

Commission received journal entry (According to Traditional Approach)

Example 1. Commission received for cash-

1. January 1, 2022, Commission received for cash ₹10,000.
Explanation:
In this transaction, two accounts are affected first cash account and second commission received account.

1.Cash Account ( Real Account)

Rules of real Account: Debit what comes in credit what goes out.
Cash account will be debited as per rules at the time of passing the journal entry.

2. Commission received Account. ( Nominal Account)

Rules of Nominal Account: Debit all losses and expenses, and credit all Income and gain.
Commission received Account will be credited as per rules at the time of passing the journal entry.

Commission received journal entry( Traditional Approach)

Example 2. Commission received by cheque-

1. January 1, 2022 Commission received by cheque  ₹15,000. The Cheque has not yet been deposited in the bank.
Explanation:
In this transaction, two accounts are affected first Cheque in hand account and second commission received account.

1.Cheque in hand account ( Real Account)

Rules of real Account: Debit what comes in credit what goes out.
Chaque in hand account will be debited as per rules at the time of passing the journal entry.

2. Commission received Account. ( Nominal Account)

Rules of Nominal Account: Debit all losses and expenses, and credit all Income and gain.
Commission received Account will be credited as per rules at the time of passing the journal entry.

Commission received journal entry( Traditional Approach)

Example 3. Commission received by cheque and cheque deposited into the bank same day-

1. January 1, 2022 Commission received by cheque 15,000 and cheque deposited into the bank same day.
Explanation:
In this transaction, two accounts are affected first Bank account and second commission received account.

1. Bank Account ( Personal  Account)

Rules of personal Account: Debit the receiver credit the giver
Bank account will be debited as per rules at the time of passing the journal entry.

2. Commission received Account. ( Nominal Account)

Rules of Nominal Account: Debit all losses and expenses, and credit all Income and gain.
Commission received Account will be credited as per rules at the time of passing the journal entry.

Commission received journal entry( Traditional Approach)

Commission received journal entry (According to Modern Approach)

Example 1. Commission received for cash-

1. January 1, 2022, Commission received for cash ₹10,000.
Explanation:
In this transaction, two accounts are affected first cash account and second commission received account.

1. Cash Account (Assets Account) –
Rules of Assets Account: Increases in assets are debits; decreases in assets are credits.)

Here the assets in the form of cash are increasing so according to the rules the cash account will be debited while passing the journal entry.

2. Commission Received Account (Revenue Account)

Rules Revenue Account: Increases in incomes and gains are credits; decreases in incomes and gains are debits.

The revenue is increasing in the form of commission received here, so the commission received account will be credited as per rules while passing the journal entry.

Commission received journal entry (Modern Approach)

Example 2. Commission received by cheque-

1. January 1, 2022, Commission received by cheque ₹15,000. The Cheque has not yet been deposited in the bank.
Explanation:
In this transaction, two accounts are affected first Cheque In Hand account and second commission received account.

1. Cheque In Hand Account (Assets Account) –
Rules of Assets Account: Increases in assets are debits; decreases in assets are credits.)

Here the assets are increasing in the form of cheque in hand, so the Cheque In Hand Account will be debited as per rules while passing the journal entry.

2. Commission Received Account (Revenue Account)

Rules Revenue Account: Increases in incomes and gains are credits; decreases in incomes and gains are debits.

The revenue is increasing in the form of commission received here, so the commission received account will be credited as per rules while passing the journal entry.

Commission received journal entry (Modern Approach)

Example 3. Commission received by cheque and cheque deposited into the bank same day

1. January 1, 2022, Commission received by cheque ₹15,000 and cheque deposited into the bank same day.
Explanation:
In this transaction, two accounts are affected first Bank account and second commission received account.

1. Bank Account (Assets Account) –
Rules of Assets Account: Increases in assets are debits; decreases in assets are credits.)

Here the assets are increasing in the form of Bank deposits, so the Bank Account will be debited as per rules while passing the journal entry.

2. Commission Received Account (Revenue Account)

Rules Revenue Account: Increases in incomes and gains are credits; decreases in incomes and gains are debits.

The revenue is increasing in the form of commission received here, so the commission received account will be credited as per rules while passing the journal entry.

Commission received journal entry (Modern Approach)

Prepaid expense journal entry

Adjustment entries

 

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