Accounting - what account is this (1 Viewer)

[mmmm.]

Is sales commission payable a current/non current liability, or is it an expense?
Also would Investments be a current asset?

 

[jimmysmith560]

Sales commission payable seems a bit tricky but after doing some research it seems that it would be classified as a current liability. This would make sense considering the definition of sales commission:

The percentage of the value of a sale that a sales associate or sales representative may earn.
​

Logically, a business would want to pay those associates/representatives within a short period of time, meaning that it would make sense to classify sales commission payable as a current liability.

Investments are seen as current assets if the firm intends to sell them within a year. Long-term investments (i.e. non-current assets) are assets that they intend to hold for more than a year.

I hope this helps!

 

[mmmm.]

Sales commission payable seems a bit tricky but after doing some research it seems that it would be classified as a current liability. This would make sense considering the definition of sales commission:

The percentage of the value of a sale that a sales associate or sales representative may earn.
​

Logically, a business would want to pay those associates/representatives within a short period of time, meaning that it would make sense to classify sales commission payable as a current liability.

Investments are seen as current assets if the firm intends to sell them within a year. Long-term investments (i.e. non-current assets) are assets that they intend to hold for more than a year.

I hope this helps!

This helps a lot, I just wasn't sure if sales commission payable was a liability or expense, because the word payable made it seem like a liability, but sales commission tends to be an expense

 

[jimmysmith560]

This helps a lot, I just wasn't sure if sales commission payable was a liability or expense, because the word payable made it seem like a liability, but sales commission tends to be an expense

Good to know it helps!

Yeah terminology can definitely be a bit confusing sometimes. Recall accounts payable from HSC Business Studies for example. Those are classified as current liabilities.

 

[seremify007]

Is sales commission payable a current/non current liability, or is it an expense?
Also would Investments be a current asset?

Typically would be a current liability since it's called "payable" which indicates it's owed but not yet paid (i.e. an accrual), and probably would be current as sales commission is usually closely timed to be aligned with when the sale is made. There are some more complex schemes which may have specific clauses which defer the payment of the commission but it would probably not be in the spirit of this question.

The corresponding journal entry would've been an expense though (i.e. Dr Sales Commission expense; Cr Sales Commission payable) in most cases - although again, I have seen some who just directly debit it to other employee entitlements expense; and there's probably some out there who try to treat it as contra revenue.

 

[BLIT2014]

Typically would be a current liability since it's called "payable" which indicates it's owed but not yet paid (i.e. an accrual), and probably would be current as sales commission is usually closely timed to be aligned with when the sale is made. There are some more complex schemes which may have specific clauses which defer the payment of the commission but it would probably not be in the spirit of this question.

The corresponding journal entry would've been an expense though (i.e. Dr Sales Commission expense; Cr Sales Commission payable) in most cases - although again, I have seen some who just directly debit it to other employee entitlements expense; and there's probably some out there who try to treat it as contra revenue.

I've seen people trying the contra revenue approach in practice.

 

[seremify007]

I've seen people trying the contra revenue approach in practice.

It used to be a principal vs agent concept but now with AASB 15, it's a much more complex assessment.

 

[mmmm.]

Hey guys, this might be a silly question, but I have a hw question that says on 8th June there was a cash sale of 80 units. We are also given a note that says "Cash sales are banked day after sale's made". So would we record the cash sale on 9th June? or would It still be 8th June


"

 

[BLIT2014]

Journal 1- 8th June
Debit Cash Received
Credit Sales income acount
To record cash received

Journal 2-9th June

Debit Cash at Bank
Credit Cash Received
To record the deposit of cash in bank