Agents Commission

System

Hi<BR><BR>Does anyone know how to treat sales commissions paid to agents in the P+L Account?<BR><BR>My wife has a company that pays commission to agents depending upon the value of their sales<BR><BR>I would put it down as an expense but the accountant who did my wife's accounts for last year included the commission in the Cost of Sales.<BR><BR>Overall it doesn't effect the Net Profit just the Gross Profit, but I would like to know the answer<BR><BR>Thanks<BR><BR>Kevin

System

Agents Commission

Hiya Kevin,<BR><BR>I'm not certain but I would have thought the commission's been included as a cost of sales previously, because it's been paid in recognition of work carried out in order to sell the goods in question.<BR><BR>I seem to remember doing something similar to the sales figure with things like carriage in, carriage out, returns in and out etc...all connected directly to the 'sales' figure.<BR><BR>

System

Agents Commission

Sales commission is treated as an expense in the P & L

System

Agents Commission

Thinking about the clients that I have, commissions can be treated either as an expense or as a cost of sale. Really it's a case of thinking about the nature of the commission.<BR>Whilst there is no hard and fast rule in my experience, I'd say that if the commission is directly attributable to a unit of output (sale), then it can rightly be included in COS. So in this case I'd probably side with your wife's accountant.<BR>Generally only larger companies go to the bother of detailing their non purchase expenses between COS, Distribution, Admin etc, with most smaller firms opting for COS to simply include opening and closing stock, and stock purchases. <BR>So long as the treatment is consistant in the accounts year on year, I don't believe that it really matters where you put it.