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Accounting Treatment Of Royalty In The Books Of Lessee

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Accounting Entries In The Book Of Lessee:

A. When the royalty is less than minimum rent:
Without maintaining minimum rent:

1. For minimum rent payable:
Royalties A/C.....................Dr.
Shortworking A/C.............Dr.
To landlord A/C

2. For minimum rent paid:
Landlord A/C.....................Dr.
To bank A/C

3. For royalties transferred to profit and loss account:
Profit and loss A/C............Dr.
To Royalties A/C

With maintaining minimum rent:

1. For royalties and shortworking raised:
Royalties A/C........................Dr.
To Shortworking A/C...........Dr.
To Royalties

2. For minimum rent payable:
Minimum rent A/C.............Dr.
To landlord A/C

3. For amount paid to landlord:
Landlord A/C......................Dr.
To bank A/C

4. For royalties transferred to profit and loss account:
Profit and loss A/C.............Dr.
To royalties A/C

B. When Royalty Is More Than Minimum Rent:

1. For the actual royalties:
Royalties A/C...................Dr.
To landlord A/C

2. For the amount paid and shortworking recouped:
Landlord A/C.................Dr.
To bank A/C
To Shortworking A/C

3. For transferring royalties and unrecouped shortworking:
Profit and loss A/C............Dr.
To royalties A/C
To Shortworking A/C

C. When Royalty Is Equal To The Minimum Rent:

1. For royalties due from lessee:
Lessee's A/C.................Dr.
To royalty A/C

2. For amount of royalty received:
Bank A/C.....................Dr.
To lessee's A/C

3. For royalties transferred:
Royalties A/C............Dr.
To profit and loss A/C

Related Topics
Concept And Meaning Of Royalty
Meaning Of Terms Used In Accounting For Royalties
Accounting Treatment Of Royalty In The Books Of Lessor
Goal Mastery For Personal And Financial Achievement

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