Commission received journal entry is a Cash/Bank A/c Debit because This increases the cash or bank balance, reflecting the receipt of commission. Credit to Commission Received A/c because This increases the commission received account, reflecting the income earned. When a business receives commission, it needs to record this income accurately in its accounting records. Commission received is considered income and contributes to the overall revenue of the business.
Key Concepts
- Commission Received: Income earned by providing services for another party, typically a percentage of sales or transactions facilitated.
- Cash/Bank: The account where the commission is received, either in cash or through a bank transfer.
Journal Entry for Commission Received
Example Scenario
Assume a company receives a commission of ₹20,000 on 01-07-2023.
Step-by-Step Journal Entry
- Record the Commission Received
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 01-07-2023 | Cash/Bank | 20,000 | Commission received | |
| 01-07-2023 | To Commission Received | 20,000 | Commission income |
Explanation
- Debit to Cash/Bank: This increases the cash or bank balance, reflecting the receipt of commission.
- Credit to Commission Received: This increases the commission received account, reflecting the income earned.
Conclusion
Accurately recording commission received ensures that the business’s financial statements reflect all sources of income. Properly managing these transactions helps maintain accurate and reliable financial records, contributing to a clearer understanding of the business’s profitability and financial health.
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