There are so many ways to increase the sales of a business firm. One of them is to hire the people from out side to work on behalf of the business firm to increase the business. These people have the direct contacts with the customers or have a good network.  These people are called as commission agents and they get the commission from a business firm in respect of getting the orders from the customers.

After getting the orders from customers through commission agents, the business firms supplies the goods to the customers and pay the commission to the commission agents as agreed by both the parties. Therefore, the commission is the expenditure for the business firm.

Entry to be Made of Commission Paid

a) Commision paid in cash:-

Type of Voucher to prepared:- Cash Payment Voucher

Entry to be made:-

Debit:-             Commission Paid Account

Credit:-           Cash Account

b) Commision paid by cheque:-

Type of Voucher to prepared:- Bank Payment Voucher

Entry to be made:-

Debit:-             Commission Paid Account

Credit:-          Bank  Account

c) For Outstanding Commission :-

Type of Voucher to be Prepared:- Journal Voucher

Entry to be made:-

Debit:- Commission Paid Account

Credit:-    Commission Payable Account

or

Expenses Payable

or

Commission Agent’s personal Account

Treatment of Commission Paid in final accounts

Commission paid on purchases or sales is a direct expenses since it relates to the cost of products sold. That is why it is shown in expenses side of trading account. Few people show the commission on sales or purchase in profit and loss account also. But in my view, it should be shown in trading account since it is directly related to purchase or sales.

The Commission also can be paid on purchases fixed assets etc.In this case, the commission is  added in the cost of fixed assets.

RELATED TERMS: