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Generally there is a requirement from Clients that they need Commission entry directly from Sales Invoice.

Currently your Invoice’ Accounting Entry would be something like this:

Customer A/c Dr 100
Sales A/c Cr. 90

Now you want to introduce Commission here But the Commission Amount should not change the Sales & Customer A/c postings.

Insert two Condition Types in your Pricing Procedure as follows:
1. Commission Payable (always Positive)
2. Commission Expenses (always Negative)

Create required GL Accounts & maintain VKOA settings.

The rate of both the above Conditions would be same say 10%.

Now your Invoice’s Accounting Entry would be:

Customer A/c Dr. 100
Commission Expenses A/c Dr. 10
Sales A/c Cr. 100
Commission Payable A/c Cr. 10

Now, as Commission is an Sales Expense, it (Debit entry of Commission Expenses) would directly hit Profit & Loss A/c (like other Expenses of Rent, Interest etc…)

For the Credit Charge of Commission charge the End-User will have to manually pass an Accounting Entry which would be as such:

Commission Payable A/c Dr. 10
To Vendor A/c Cr. 10

The above entry would clear the Commission Payable A/c & create a liability of Rs. 10 in Vendor’s account.

We have implemented the above scenario at a client site & they are successfully using this arrangement.

As you are already entering Partner Function of Vendor in Sales Order / Invoice, you can anytime create a Z-Report for Commission Payable to each Vendor over a period of time…

Hope this helps,

Thanks,

Jignesh Mehta

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7 Comments

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  1. Vikram R Patel

    Hello Jignesh,

    Very thoughtful post!

    Although I am with you from concept point of view. I was wondering if a document would screen print for configuration details along with G/Laccount determination setup.

    I would like more information such as which Account Key would be used for both condition types:

    1. Commission Payable

    2. Commission Expenses

    Would we use Sales Deductions (ERS)?

    My query could be little to basic, however would appreciate your further input.

    Regards

    Vikram

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  2. rajesh kk

    Hi Jignesh,

    Thanks a lot for posting …!

    In A/C Payables for credit charge commission with out manual entry pass is it possible an accounting entry ? if it possible . Please suggest me what needs to be done.

    Regards,

    Raj

    For the Credit Charge of Commission charge the End-User will have to manually pass an Accounting Entry which would be as such:

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    1. Jignesh Mehta Post author

      There is no other option. From Sales Invoice you cannot post direrctly to Vendor’s (Agent) A/c. So we re using Commission Payable Account & then passing manual entry to respective vendor account.

      As an alternative, you can directly issue payments from Commission Payable Account. Thus there will  be no maunal JV involved here & in the payment doucment, mentioned Vendor’s (Agent) name in Text Field.

      Thanks,

      Jignesh Mehta

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      1. rajesh kk

        Hi Jignesh,

        Thanks for  instant reply….

        If we mention vendor (agent ) to text field and  risk is high.any one can change text , more commission for one vendor  or less commission for another vendor.   please suggest me some other standard solution .

        .

        As an alternative, you can directly issue payments from Commission Payable Account. Thus there will  be no maunal JV involved here & in the payment doucment, mentioned Vendor’s (Agent) name in Text Field.

        Regards,

        Raj

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  3. A$HI$H $AP

    Hello Jignesh Mehta

    Will TDS work on this concept, I mean when Agent will provide bill and we have to pay. Please highlight the same.

    Thanking you!

    Ashish Mishra

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  4. Arun Biswal

    Hi Jignesh,

    It is very informative document. I want to know end of the week or month how I will against which sales representative how much I have to pay and how much already paid.

    Regards

    Arun

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    1. Jignesh Mehta Post author

      Hello Arun,

      The accounting department will have to manually pass the following entry:

      Commission Payable A/c Dr. 10

      To Vendor A/c Cr. 10


      Which means that the amount standing open in respective Vendor account is due to to be paid to him.

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