Journal entry of received commission 25000 half of which is in advance?

Question

Answer

Journal Entry of Received Commission with Half in Advance

When a business or individual provides services or products to a client, they may receive a commission as payment. In some cases, the commission may be paid in advance, while in others, it may be paid after the services or products have been delivered. Here's how to make a journal entry for receiving a commission of 25000, half of which is in advance:

Step 1: Determine the Accounts Involved

The first step is to determine the accounts involved in the transaction. In this case, the relevant accounts are:

Commission Income

Cash/Bank Account

Unearned Commission Income

Step 2: Record the Advance Payment

Since half of the commission was paid in advance, it needs to be recorded as unearned commission income. This is done using the following journal entry:

Debit: Cash/Bank Account - 12500

Credit: Unearned Commission Income - 12500

This increases the balance of the cash/bank account and creates a liability for the business for the unearned commission income.

Step 3: Record the Commission Income

When the remaining half of the commission is received, it needs to be recorded as commission income. This is done using the following journal entry:

Debit: Unearned Commission Income - 12500

Credit: Commission Income - 12500

This reduces the liability for the unearned commission income and increases the commission income account.

Step 4: Record the Cash/Bank Transaction

Finally, the cash/bank transaction needs to be recorded. This is done using the following journal entry:

Debit: Cash/Bank Account - 12500

Credit: Commission Income - 12500

This increases the balance of the cash/bank account and completes the accounting for the commission income transaction.

Conclusion

Receiving a commission of 25000, half of which is in advance, requires careful accounting to ensure accurate financial statements. By following the steps outlined above, businesses can properly record these transactions and maintain accurate financial records.

Answer

At the time of receiving cash
Cash/Bank A/c Dr. - 25000 To Commission A/c - 25000
At the time of closing of accounting year
Commission A/c Dr. - 12500 To Comm. Rec. in advance-12500

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