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| Corporate Accounting Treatment |
Accounting treatment for sales commission-with practical Examples :
Accounting treatment for sales commission involves recording the expense when it is incurred, and it depends on whether the commission is paid immediately or accrued for future payment. Sales commission is considered an operational expense and is typically included in the income statement under "Selling Expenses" or "Administrative Expenses."
Here is the Learning demo sheet is presented for better understanding:
Md. Roviul Hassan is a sales executive of the cordes Dyeing and printing Mills LTD.He is offered by corporate practice bd ltd,my company , if he agree to purchase yarn from our company ,he will be paid commission personally per kg @ Tk.1.00.sales executed by deemed export .Finally, Md. Roviul Hassan confirm & issue a Purchase order following way- Applicable TDS =20%
Statement of sales summary:
|
Sl.No |
LC No. |
Count |
Kg |
Rate |
Value($) |
|
1 |
1005240300180 |
7cd-bci |
10,000 |
$2.00 |
20,000 |
|
2 |
1005240300163 |
8cd-OE |
20000 |
$2.00 |
40,000 |
|
3 |
1005240300165 |
9slub-bd |
30,000 |
$1.6666 |
50,000 |
|
|
|
Total |
60,000 |
|
1,10,000 |
Hare is the Practical Example:
Sales commission Journal entry:
|
Ledger Head |
Debit-(TK.) |
Credit(TK.) |
|
|
Sales Incentives |
60,000 |
|
|
|
Roviul Hassan S.C |
|
48,000 |
|
|
Roviul Hassan –AIT deduction |
|
12,000 |
|
|
Total Amount(Tk.) |
60,000 |
60,000 |
|
Narration:
Sales Commission A/C- cordes Dyeing and printing Mills LTD
LC No. 1005240300180, 1005240300163 ,1005240300165 dt.10.05.2024.
|
Ledger Head |
Debit-(TK.) |
Credit(TK.) |
|
|
Roviul Hassan S.C |
48,000 |
|
|
|
Social Islamic Bank Ltd. SND- 6858
|
|
48,000 |
|
|
Total Amount(Tk.) |
48,000 |
48,000 |
|
Narration:
Paid Vide Chq No.60657 dt.06.04.23 against sales Commission A/C-cordes Dyeing and printing Mills LTD
When TDS deposited through Govt Challan
|
Ledger Head |
Debit-(TK.) |
Credit(TK.) |
|
|
Roviul Hassan –AIT deduction |
12,000 |
|
|
|
Factory Petty cash
|
|
12,000 |
|
|
Total Amount(Tk.) |
12,000 |
12,000 |
|
Narration:
When TDS deposited from Factory Petty cash Tk12,000 dt10.05.2024
Important Considerations:
• Timing: Commissions should be recognized in the period when the sale occurs, following the matching principle in accounting.
• Accrual vs. Cash Basis: The accounting treatment may vary depending on whether the company follows an accrual or cash basis of accounting.
• Income Statement Impact: Sales commission reduces the company's net income and increases its operational expenses.
In Finally:
This process ensures that commission expenses are properly recognized in the accounting records, either when incurred or paid.