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Does sales commission get reported in the income statement?

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posted Jun 22 by Chetan Hindu

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1 Answer

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Sales commissions earned by a company would be reported as revenue in the company's income statement. Sales commissions that a company must pay to others are reported as an expense.

Under the accrual basis of accounting (as opposed to the cash basis) commission revenues should be reported when the company earns the commissions. The commission expense should be reported when the company has incurred the expense and liability. (This would also be the time when the other party has earned the commissions and the right to receive them.)

The commission revenues would be reported as operating revenue (in the section where sales are reported), if the commissions are earned as a main activity of the company. If the commissions are incidental or involve a peripheral activity, these commission revenues would be reported as other income.

Commission expense would be reported as a selling expense along with other operating expenses when they are related to the company's main activities. If a commission expense pertains to a peripheral activity, it would be reported as other expense

answer Jun 23 by Shantanu Arora
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