Royalty Account

Theory of Royalty Account

Q. What is Royalty?

Ans. A royalty is a periodically payment based on output or sale for the use of certain trade mark, copy right, assets, etc.

Q. What is minimum rent/dead rent/fixed rent?

Ans. Royalty agreement are generally associated with a clause that the leaser or landlord must received a minimum amount, whatever be the production or sale in a particular period such minimum amount is known as minimum rent.

Q. What is Short Working?

Ans. Excess of minimum rent over actual royalty calculated on the basic output or sale is termed as short working.

Q. What is Recoupment?

Ans. Recoupment mean recovery of short working of previous year or years from excess royalty of current year.

Q. What is sub-lease/sub-royalty?

Ans. Sometimes the term of original lease may empower the lessee to sub-let a part of the land to another person as a sub-lessee in such a case the position of original lessee will be two folded as lessee paying royalty to landlord and sub-lessee receiving royalties from sub-lessee.

Q. What is Royalty receivable?

Ans. A sum royalty which is receivable by original lessee in case of sub-lessee is called royalty receivable.

Q. What is Short Working Write-off?

Ans. Short working should be carry forward and shown in the balance sheet as long as they are recoverable and short working which can not be recovered during the allowed period of time should be closed by transferring them to Profit and loss Account which is called short working write off.

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