Commissions Received

This Sales code records income the business earns from commissions received. As an income account, it normally carries a credit balance: credit entries increase the balance (recording new income) and debit entries decrease it (for example, a credit note issued to a customer).

Real-world examples

Estate agency (commission from vendors)

An estate agent charges the seller a commission on completion of a property sale — say 1.5% of the sale price. On a £300,000 sale, the £5,400 commission (£4,500 net, £900 VAT) is a debit of £5,400 to 1100 (Debtors Control Account), a credit of £4,500 to 4902 (Commissions Received), and a credit of £900 to 2200 (Sales Tax Control Account). Because the fee only becomes due on legal completion, agents typically don't recognise the income until that point, however long the sale took to progress.

Insurance broking (commission from insurers)

An insurance broker is usually paid commission by the insurer, not the client — a percentage of the premium, either deducted before the balance is passed on or invoiced separately depending on the arrangement. A £120 commission (£100 net, £20 VAT) on a policy the broker arranged is a debit of £120 to 1100, a credit of £100 to 4902, and a credit of £20 to 2200. Some smaller policies are arranged through a scheme where commission is netted off automatically, so it never passes through 1100 at all — just a direct credit to 4902 against the bank receipt.

Affiliate marketing (commission from overseas merchants)

An affiliate marketing business earns commission from merchants whose products it promotes online, typically a percentage of the sale value tracked through a referral link. Because most affiliate networks and merchants are based overseas — particularly the US — commission received is often treated as outside the scope of UK VAT, since it's a B2B supply of services to a business outside the UK. A £340 commission payment might simply be a debit of £340 to 1200 (Bank) and a credit of £340 to 4902, with no VAT posted at all despite the business being VAT-registered.

Commonly confused with

Because code 4901 (Royalties Received) sits right next to this one in Sales, it's a common mis-posting target. Code 4902 is specifically for commissions received, while 4901 covers royalties received — similar in nature, but keeping them separate is what makes the sales section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

A sale posted to the wrong Sales code won't change total turnover, but it will distort the sales analysis used to see which products, services or channels are actually driving revenue.

Other codes in Sales