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You are unknown about the commission until its payment in the current year
Definitely as a professional accountant, you are making your financials as per IAS/IFRS, you have made the accrual for this commission and this time just pay from accrued expenses.
In the above case it is impossible for you to create estimates on the basis of available information so that the financial statements are originally reflected the impact of such expenses.(in the previous year)
You are required to retrospectively apply a change in accounting principle to all prior periods, unless it is impracticable to do so.
Here the entries may be treated as if it is incurred for the current year. Small amounts need not be capitalized--If the amounts are comparatively bigger that can be capitalized.
Treatment depends on
* - Have you been recorded as an Accrued expense is due the previous year
Enrollment
*** From / Accrued expenses
*** To / Bank
* - Has been forgotten
*- Low relative value
Bearing on the current year expenses
*-Large relative value
H deducted from retained earnings
Commission paid this year but payable for last year is treated as outsanding expensess so this commison paid debited in p&l Account and also showing in balance sheet liablity side treated as a outstanding liability
or
If we treat commission as a capital expenditure which was incurred for purchaing the land then it should be added to land.
In the previous year, when you buy a land, at that time Company will create a payable like:
Dr. Commission Expense XX
Cr. To Commission Payable XX
And now in this year, will only reduce the liability like:
Dr. Commission Payable XX
Cr. To Cash XX
The logical treatment is, if last year adusted like entry is
Commission on land -------
to Commission payable -------
Current year treatment is
Payable Commission on land --------
To Cash--------
If Forgot to record the last year commission on land, and paid in current year then
Commisssion on land --------=
To Cash ------
From / Accrued expenses
*** To / Bank
You need to have accrued Commission in ther previous year then expense it in the current year by CR Cas/bank and DR Commission Payable.
To me the correct answer is what FITAH MOHAMED said except deducting the cost from the retained earning. According me it is better to capitalize the cost.
Commission paid in current year but accrued for last year is treated as outsanding expensess in the last year so this commison payable debited to P&L A/C and also showed in the liability side of the balance sheet as an outstanding expenses, incase the amount of commission is huge we need to treat commission as a capital expenditure which was incurred for purchaing the land added to the value of the land.
