Commission Payable

General introduction; Any time you hear of payable, you should understand this represents a liability of a debt. Therefore, commission payable is a debt that one party referred to as the borrower of services owes another party referred to as service provider. This debt arises when the user of certain services enjoys the services with an agreement to pay for such in the future.

Example;

Assume that MM co. ltd agreed to sell X products of XX co ltd at a commission of $10,000 per annum. On 31st/12/2020, XX co ltd had not yet paid that amount to MM ltd.

Assume that the financial period of XX co ltd ends on 31st/12/XX. Then, in the books of XX co ltd will be recorded as follows;

Journal entry

DR Profit & Loss Account 10,000

CR Commission Payable     10,000

Posting of the same transaction in the ledger accounts

In the balance sheet, the entry will appear as follows;