Are commissions a cost of goods sold account or an expense?

Definition of Commissions

Commissions are compensation for obtaining sales. Hence, sales commissions are a selling expense and will be recorded in general ledger accounts having Sales Commissions Expenses in their title. Sales commissions are considered to be operating expenses and are presented on the income statement as SG&A expenses. (SG&A is the acronym for selling, general and administrative expenses.)

Sales commissions are not part of the cost of a product. Therefore, sales commissions are not assigned to the cost of goods held in inventory or to the cost of goods sold.

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