BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Nominal Accounts are accounts related to and associated with losses, expenses, income, or gains. Examples include a purchase account, sales account, salary A/C, commission A/C, etc. The outcome of a nominal account is either profit or loss, which is then ultimately transferred to the capital account.

Detailed explanation-2: -Hence, commission received is a nominal account.

Detailed explanation-3: -An account used to record commissions received by an organization. In a double-entry system, the commissions received account will be credited and the bank account (or the debtors’ account until it is received) is debited. This account may be combined with the commissions paid account.

Detailed explanation-4: -Commissions are compensation for obtaining sales. Hence, sales commissions are a selling expense and will be recorded in general ledger accounts having Sales Commissions Expenses in their title.

Detailed explanation-5: -In cases where a company earns a sales commission, it is reported as revenue in the income statement. It is normally classified as operating revenue if the commission earned is part of the core operations of the business. Otherwise, it is classified as other income.