royalty account in the book of lessor

1. Royalty account –
in the book of
lessor
BY- RACHIT JAIN
B.COM (HONS)
29

2. Royalty is a periodical payment
based on output or sale for
the use of a certain asset or
right like mine , copyright or
patient to its owner.

3. TERMS USED IN
ROYALTY AGREEMENT
LESSOR LESSEE

4. WHAT IS LESSOR
The person who gives out his some
special rights over something say
mining rights or patent rights , on
lease to another person for a
consideration is called the landlord or
lessor or patentee or an author.

5. ACCOUNTING
ENTRIES IN THE BOOK
OF THE LESSOR

6. WHEN THE ROYALTIES
RECEIVED ARE LESS THAN
THE MINIMUM RENT AND
SHORTWORKING ARE
RECOVERABLE OUT OF
FUTURE YEARS.

7. DAT
E
PARTICULAR L.F DEBIT
AMOUNT
CREDIT
AMOUNT
Lessee’s
account…………….…...Dr
To Royalties Receivable
account
To Shortworking Suspense
account
(Being minimum rent due and
excess of minimum rent over
actual royalties transfer to
shortworking suspense
account)
Bank
account………....……....…Dr
To Lessee’s account
(Being the amount of royalties
1.
2.
3.

8. WHEN THE ROYALTIES
EARNED EXCEED THE
MINIMUM RENT AND
SHORTWORKING ARE
RECOVERED.

9. DAT
E
PARTICULAR L.F DEBIT
AMOUNT
CREDIT
AMOUNT
Lessee’s
account….....................Dr
Shortworking
account.................Dr
To Royalties
Receivable
account
(Being royalties earned and
shortworking recouped)
Bank account
…………………..Dr
To Lessee’s account
(Being minimum rent received)
Royalties Receivable
account…….Dr
1.
2.
3.

10. If any balance of shortworking
suspense account is no longer
recoverable , it should be transferred
to profit and loss account.
DAT
E
PARTICULAR L.F DEBIT
AMOUNT
CREDIT
AMOUNT
Shortworking suspense
account…………………………
Dr
To Profit and Loss
account
(Being irrecoverable balance in
shortworking suspense account
to profit and loss account)

11. WHEN NEITHER
SHORTWORKING
OCCURS AND
NEITHER IT IS
RECOVERABLE.

12. DAT
E
PARTICULAR L.F DEBIT
AMOUNT
CREDIT
AMOUNT
Lessee’s
account……………..….Dr
To Royalties Receivable
account
(Being royalties earned)
Bank
account…………….……..Dr
To Lessee’s
account
(Being amount due from____
received)
Royalties Receivable
account…….Dr
To Profit and Loss
1.
2.
3.

13. ACCOUNTS MAINTAINED IN
THE BOOKS OF LESSOR
• Lessee’s account
• Royalties Receivable account
• Shortworking Suspense account
• Profit and loss account

14. Format of accounts
DAT
E
PARTICULAR AMOUNT DAT
E
PARTICOLAR AMOUNT