Posting commission in a sales invoice

[Bijith]

I am developing an inventory software,in that i have a doubt on posting
agent's commission to accounts when saving a sales invoice.

I have the following acccounts in the software,

Cash In Hand
Sales Account
Agents account [under commission group <- under Expense group]

whenever a new invoice created user will select particular agent for that sale.

Agents commission per item are set when a new agent is created.

Total Commission that the agent has to be given is shown in a box in the invoice.

Can anyone pls clarify the posting of commission to accounts.

for ex - if commission is 100 rs

Debit Credit

Agent 100[Dr.]
cash In Hand 100[Cr.]

[Dard]

As commision is a direct selling expense, it should be deducted from Sales.

[Bijith]

Then The posting is like
Debit Credit
AGentCommisstion 100
Sales A/C 100

is'nt it?

[Dard]

It won't be added to sales. As it an expense, it is deducted from sales. Entry is
Dr Sales 100
Cr Cash 100

[Bijith]

Thank for helping me. please tell me the below is right or not ...

When a new agent is created an account would also be created for the agent. Commissions are paid to the agent later. For this, there is a Commission payment form.

When an agent is selected for payment,software has to show that,there is an X amount to be paid

If The posting is like

[Dr] Sales A/c 100
[Cr] Cash A/c 100

There will not be any connection b/w agent and sales

can i post the commission as -

[Dr] Sales A/c 100
[Cr] Agent A/c 100

[Dard]

You can do this
When you pay commision
Dr Commision
Cr Cash
At the end of the financial year, close the commision account and transfer it to Statement of comprehensive income(Income statement) by decreasing sales. At year end, the entry will be
Dr Sales
Cr Commision

[[email protected]]

as i understand in software we must book sale invoice as credit sale alongwith commission paid amount so entry will be-

let suppose

ABC (Dr)Rs1900
Commission Allowed(DR)Rs 100

to Sale Account (Cr) Rs 2000
________ _______
2000 2000

if you did not post the commission at the time of sale on cash and now just want to post commission on sale of Rs. 100 the the entry will be-



Commission Allowed Dr Rs 100
to Cash or bank(Cr)Rs 100
Commission paid to ABC on Inv NO......dt....

IF THERE IS ANY MISTAKE I WILL APPRECIATE TO CORRECT ME TOO. THANKS

[bilalfca]

salam..

Bijith

my understanding is

if u have made sales of $100 for Cash and the commission is, say, $10 for that (and is payable), the entries for this transaction will be

1) Cash $100 Dr.
Sales $100 Cr.
-----------------------

2) Commission $10 Dr.
Commission P/A $10 Cr.
-----------------------
now when commission is paid to the agent, the entry will be

3) Commission P/A $10 Dr.
Cash $10 Cr.
-----------------------

the commission a/c is balanced, like u have no balance at the year end..

this is my understanding!!!

Dard..

Sales is Revenue, isn't it be reflected at the Gross Amount coz Revenue is always reflected at the gross amount?

like, we should not decrease our sales of $100 to $90 (in this scenario)... sales should be reported at its original figure instead of netting off the sales..

Further discussion will be beneficial for students like me!

Regards.

[Dard]

You are right bilal. Kindly read my last post, i have given the same solution

[bilalfca]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Dard</i>
<br />You are right bilal. Kindly read my last post, i have given the same solution
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Salam

thanks for ur reply, i really appreciate it.

i just want a clarification, will sales be reduced by the amount of commission paid?? if so, why?

[bilalfca]

coz u have written that close the commission a/c (thats fine) and transfer it to SOCI (its fine too) "by decreasing sales"

m saying that why should sales be decreased? (m understanding that u have to net off the commission from the sales, if m wrong in my understanding, i apologizes in advance)\

Regards

[Dard]

Brother i am a student too. As per my understanding the selling commission reduces revenue because had the commission not been paid, sales would not have occured in the first place.
A senior's advice is requested.

[basit_namdar]

In my understanding sales commission is a expense like sales discount which is adjusted against sales amount. As the amount received by company because of that sale is directly reduced by the amount of commission.

[bilalfca]

salam.

dard

thanks for ur reply. actually i had read in Gripping IFRS about it that Sales is Revenue and Revenue is always stated at the Gross Amount...

well lets wait for someone more senior!

this point will certainly add to our knowledge....

Regards!