Journal entry for commission earned but not received

Commission earned but not received is called accrued income. As we know there are two types of accounting, cash basis of accounting, in which the transaction is recorded only when cash is received or paid, and accrual basis of accounting, in which even if money is yet to be accepted or paid, the transactions are still recorded.

E.g of accrual income- rent earned but not collected, interest on the investment earned but not received, etc.

Journal entry

• The commission that is to be received is debited, indicating the increase in assets whereas, the commission account (which will be giving you the commission) is credited.
  • Later on, upon receiving the cash an entry is passed crediting the commission receivable as shown below:

• These are adjusted while making the final accounts for the business.

Simplifying with an example

If the rent earned was $1,000 and it’s yet to be received, we’ll be passing this entry-

When it’s received, this entry is passed