Accounting & Bookkeeping & Small Business Forum

Guest · Posted: Thu Oct 21, 2004 5:46 am Post subject: Cost Of Sales Question

Hi there,

I was looking at the books of a new client and noticed that sales commission was under cost of sales. I always thought that commissions were always operations expense. I know they have hired a couple of CPA’s to work on their books and do some cleanup. That’s why I’m confused here. Can you treat commissions as Cost of Sales?

Thanks

Ernesto

Guest · Posted: Tue Oct 26, 2004 10:29 am Post subject: RE: Cost Of Sales Question

They should be an expense, but there's flexibility if the owner feels strongly that he/she would like it to remain that way.

Guest · Posted: Fri Nov 05, 2004 7:25 pm Post subject: RE: Cost Of Sales Question

Hi Ernesto,

Sales commission is treated as part of Sales & General administrative (SGA) expenses. Simply put, it is not and should not be classified as part of cost of sales in a traditional Income statement presentation. And normally separated from other operating expenses (non-sales/marketing related activities). It may form part of cost of sales if you're doing some cost/pricing analysis. But that's another story.

Arnel