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The payment is not the expense. The benefit period decides.
The problem
Paying a commission is a cash event. Recognising it is not. The amount, the period it benefits, whether a renewal earns its own treatment, and what happens when the customer leaves early are separate questions. Answer them in a spreadsheet and the schedule stops reconciling by month four.
Architecture
Activity enters on the left. A posted, traceable journal leaves on the right.
Calculated and paid
Under your policy
Independent of the revenue plan
Held in the system
Against the capitalised balance
Traceable to the commission event
The boundary
Native capability first, then where the platform hands the work back.
Handles natively
Hands back
Handles natively
Hands back
Scope
Worked example
Check the arithmetic. Source equals schedule equals journal equals ledger.
| Line | Amount | Treatment |
|---|---|---|
| Contract value | $360,000 | 36 month initial term |
| Commission paid | $36,000 | Cash event |
| Amortised over the revenue schedule | $1,000 | Per month, 36 months |
| Amortised over a 48 month benefit period | $750 | Per month, 48 months |
| Year 1 difference | $3,000 | 12 x (1,000 - 750) |
| Recognised through month 36 | $27,000 | 36 x 750 |
| Carried into the renewal term | $9,000 | Ties to 36,000 |
| Termination at month 20 | $15,000 | Recognised |
| Capitalised balance written off | $21,000 | Ties to 36,000 |
| DR | Commission expense | $750 |
| CR | Deferred commission cost | $750 |
We build and configure accounting systems. We do not provide accounting, audit, or tax advice. Your accounting policy is set by your accountants and tested by your auditors. We build the system that runs it.
Ready to see it against your process?
Walk through the schedule, the journal, and the evidence trail against your own process.