Sales Commissions

This Direct Expenses code records costs directly tied to producing sales, relating to sales commissions. As an expense account, it normally carries a debit balance: debit entries increase the balance and credit entries decrease it.

Real-world examples

Retail (employed sales staff)

A retail chain pays store staff a sales-linked bonus on top of basic pay, processed through payroll like any other element of salary. The commission — say £1,850 for the period — is allocated to 6100 via a payroll journal: a debit of £1,850 to 6100 (Sales Commissions) and a credit of £1,850 to the wages control account. Because it's paid to employees through PAYE, there's no VAT on this entry at all.

Manufacturing (independent sales agents)

A manufacturer selling through independent, VAT-registered sales agents receives an invoice from an agent for commission earned on the quarter's orders — say £2,400 (£2,000 net). This is a normal VATable purchase: a debit of £2,000 to 6100, a debit of £400 to 2201, and a credit of £2,400 to 2100. Unlike employed sales staff, a self-employed agent charges VAT on their commission just as any other VAT-registered supplier would.

Financial services and insurance (introducer commission)

An insurance broker pays introducer commission to a third party for referring business. Commission paid for genuine insurance intermediary services is typically exempt from VAT under the insurance exemption, so a £900 commission payment is a straightforward debit of £900 to 6100 and a credit of £900 to 2100 — no VAT to reclaim, even though the introducer is a separate VAT-registered business, because the underlying service falls within an exempt category rather than being standard-rated.

Commonly confused with

Because code 6002 (Sub-Contractors) sits right next to this one in Direct Expenses, it's a common mis-posting target. Code 6100 is specifically for sales commissions, while 6002 covers sub-contractors — similar in nature, but keeping them separate is what makes the direct expenses section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

Posting to the wrong cost code here won't change total cost of sales, but it will distort gross margin analysis by category, making it harder to see which input costs are actually rising.

Other codes in Direct Expenses