Question

Plz explain me commission received account in brief​

Answer 1

Answer:

Commission received in advance

The journal entry is as follows:

1.Commission received in cash or in cheque

Cash / bank a/c……dr

To Commission received a/c

Cash is real a/c and comes in business so debited OR Bank is personal a/c and receiver so debited

Commission received is income and nominal a/c so credited

NOTE : THIS JOURNAL ENTRY IS PASSED AT THE TIME OF RECEIVING CASH

2 . As commission is received in advance i.e. income of next year received in current year an additional journal entry is to be made.

Commission received a/c…..dr

To commission received in advance a/c

As commission received is income and nominal account so it is usually credited but as commission is received in advance so it is not of current year so commission a/c is debited to decrease that part of income which is not of current year and hence commission received in advance is credited because it is liability for next year as the benefit is yet to be given

NOTE : THIS JOURNAL ENTRY IS PASSED IN CLOSING CURRENT YEAR BOOKS OF ACCOUNTS

3.When next year books of accounts will be made, the journal entry of recording the income which is actually of that year, following journal entry would be passed.

Commission received in advance a/c..dr

To Commission received a/c

Commission received in advance was credited in Journal entry 2 above as it was liability now it is debited as liability is being cancelled as income is of that year

Commission is income and nominal a/c so credited as it pertains to current year income

NOTE : THIS JOURNAL ENTRY WILL BE PASSED IN NEXT YEAR BOOKS OF ACCOUNTS AS INCOME PERTAINS TO NEXT YEAR

So in all 3 journal entries are there. But journal entry no. 1 is to be made when receiving cash. Journal entry no. 2 is to be made when closing the current year books of accounts. Journal entry no. 3 is made in the next year books of accounts.

Explanation: