Accounting Treatment Of Royalty In The Books Of Lessor

Accounting Entries In The Books Of Lessor:

A. When Royalty Is Less Than The Minimum Rent:

Without maintaining minimum rent account:

1. For the actual royalties:
Lessee's A/C...................Dr.
To Royalties A/C
To Shortworking A/c

2. For due amount received:
Bank A/C...............Dr.
To Lessee A/C

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

With maintaining minimum rent account:

1. For minimum rent receivable:
Minimum rent A/c......................Dr.
To royalties A/C
To Shortworking A/C

2. For minimum rent due:
Lessee's A/C................Dr.
To minimum rent A/c

3. For due amount received:
Bank A/C....................Dr.
To Lessee's A/C

4. For Royalties transferred:
Profit and loss A/C...............Dr.
To Royalties A/C

B. When Royalty Is Less Than Minimum Rent:

1. For royalties due:
Lessee's A/C....................Dr.
To Royalty A/C

2. For shortworking recouped and royalty received:
Bank A/C...................Dr.
Shortworking A/C....Dr.
To Lessee's A/C

3. For royalty and unrecouped shortworking transferred:
Royalties A/C...............Dr.
Shortworking A/C........Dr.
To profit and loss A/C

C. When Royalty Is Equal To The Minimum Rent:

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

2. For the amount paid:
Landlord A/C...........Dr.
To Bank A/C

3. For transferring royalties:
Profit and loss A/C..........Dr.
To Royalties A/C