Commission paid journal entry is Commission Expense Account Debit and Credit to Cash/Bank Account. Commission paid refers to the payment made to an individual or entity for services rendered, typically as a percentage of sales or revenue. Recording this transaction accurately is important for tracking expenses and maintaining correct financial records.
Key Concepts
- Commission Expense: The account representing the cost of commissions paid.
- Cash/Bank Account: The account from which the commission payment is made.
Journal Entry for Commission Paid
Example Scenario
Assume a company pays a commission of ₹5,000 to a sales agent on 20-09-2023 for sales made.
Step-by-Step Journal Entry
- Record the Commission Payment
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 20-09-2023 | Commission Expense | 5,000 | Commission paid to sales agent | |
| 20-09-2023 | To Cash/Bank | 5,000 | Payment of commission |
Explanation
- Debit to Commission Expense: This increases the commission expense account, reflecting the cost incurred for commissions.
- Credit to Cash/Bank: This decreases the cash or bank account balance, reflecting the payment made for the commission.
Conclusion
Accurately recording commission payments is essential for tracking expenses and maintaining precise financial records. Properly managing these transactions helps ensure that the business’s expenses are accurately represented in the financial statements, contributing to better financial management and reporting.