Manager’s Commission
The manager may be paid a commission due to an increase in sales of the business. This commission is paid on the net profit of the company. There can be two instances i.e. it can be paid before or after charging a commission.
Adjustment:
A. If Manager’s Commission is given outside the trial balance
In such case, two effects will take place:
- Shown in the Dr. side of the Profit & Loss A/c.
- Shown as an Outstanding Liability on the Liabilities side of the Balance Sheet.
B. If Manager’s Commission is given inside the trial balance
It will only be shown in the Dr. side of the Profit & Loss A/c.
Financial Statement with Adjustment with Examples-V
Through adjustments in the financial statement, we consider all the accounting items which are relevant to the current financial year, but not recorded in the books due to any reason or wrongly recorded. This helps us in getting the actual profit or loss for the year and the accurate financial position of the company. Six basic adjustments, like Use of Goods in Business, Manager’s Commission on Profit, Deferred Revenue Expenditure, Contingent Liability, Sale of Goods on Sale or Return Basis, Goods in Transit are discussed below.