Agents' commission earned this month, paid next
How an estate agency shows agents' commission earned in one month but paid through payroll in the next, with an accrual journal and its reversal.
By Achekam · · 4 min read · For Real estate businesses in South Africa, Nigeria, Kenya
An estate agency's best month on paper can look strangely profitable in the books. Several sales registered, the agency's commission came in, and the income statement shows a strong result. The agents' share of that commission, though, will only be paid with next month's salaries. Until then, it is nowhere in the books.
The month after looks worse than it was: little commission income, but a large commission expense on the payroll. Neither month tells the truth about the business. The fix is an accrual: recognising the agents' commission as a cost in the month it was earned, even though the cash goes out later. This article explains how to estimate it, post it, reverse it and close the month cleanly.
Matching the cost to the sale
The principle is simple. The agent's commission is the cost of earning the agency's commission. Both belong in the same month.
Investopedia lists employee commissions, wages and bonuses earned but paid in the next period among its examples of accrued expenses. AccountingTools gives a close parallel: wages earned between the last pay date and month end. Agents' commission sits in exactly that position. The agent has done the work and become entitled to the commission; only the payment is still to come.
Investopedia explains that accrued expenses are shown on the balance sheet as current liabilities, because they are obligations to make future cash payments. At month end, the agency owes its agents that commission, and the balance sheet should say so.
Estimating the accrual
For most agencies, the estimate is not really an estimate. The commission policy sets each agent's share, and the deals that became payable in the month are known. Build the figure from the deal list:
- List every deal on which the agency's commission was earned in the month.
- For each, apply the agent's split under their commission agreement.
- Add any amounts the agency pays on top of commission, such as the employer's share of payroll contributions, if your accountant treats them as part of the cost.
- Total it by agent, so the figure can be checked against next month's payslips.
Where a split is genuinely uncertain, perhaps because two agents dispute who introduced the buyer, accrue what you expect to pay and note the uncertainty.
Commission for independent agents who invoice the agency is a different matter: their invoices are supplier bills, not payroll, and commission bills from independent agents explains how they are recorded.
The journal and its reversal
Month end: post the accrual
In Achekam, a business can post manual journals. At month end, post one that debits the commission expense account and credits an accrued commission liability account. Achekam refuses an unbalanced journal, and one dated in a closed month, so it must be dated in the month being closed and posted before that month is closed.
Start of next month: reverse it
Investopedia warns that every accrued expense must have a reversing entry, otherwise a company risks recording both the accrual and the actual cost. That is the trap here. When payroll posts the real commission next month, the expense will be recorded again. Without a reversal, the agency shows the commission twice.
So on the first day of the new month, post the mirror image of the accrual: debit the accrued commission liability and credit commission expense. Put it on a month-start checklist so it is never forgotten. If a journal was posted with the wrong figure, Achekam corrects it only by a reversal, which keeps the original and the correction side by side for whoever reviews the books.
When payroll posts the actual commission
The agents' commission is then paid in the normal pay run. In Achekam, an approved pay run is posted to the business's own ledger as a wages journal, with amounts owed to the tax authority and funds shown as liabilities. Agents' commission through payroll covers how commission is set up in the pay run itself.
Here is how the three entries net out, in words:
| When | Entry | Effect on commission expense |
|---|---|---|
| Month 1, last day | Accrual journal | Expense recognised in the month it was earned |
| Month 2, first day | Reversal journal | Cancels the accrual's expense in month 2 |
| Month 2, pay run | Payroll wages journal | Records the actual commission in month 2 |
The reversal and the payroll entry largely cancel out in month 2. What remains is any difference between the accrued estimate and what was actually paid, which is usually small and lands in month 2.
Closing the month
Months in Achekam can be soft-closed, hard-closed and locked. A closed month refuses postings from every source, and reopening a hard close needs a second approver. Before closing, the screen checks that the ledger balances and that no posting suggestions, unposted bills or unmatched bank lines are waiting.
That makes the order of work at month end matter:
- Post the commission accrual.
- Post any other accruals the month needs; month-end accruals gives a wider list from another industry.
- Clear the closing checks.
- Close the month.
- On the first day of the next month, post the reversal.
Once the month is hard-closed, an accrual forgotten in the rush cannot slip in afterwards without a second person agreeing to reopen it, which is the point.
Learn the principle
Investopedia's explanation of accrued expenses covers what they are, where they appear and why reversing entries matter. Pull this month's deal list, calculate each agent's accrued commission, and post the journal before you close.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
