Financial Accounting

Accounting For Royalties

• It is the amount payable to any person or institution as consideration for the use of rights vested in him is Royalty. The criteria for payment could be production, sales, etc.
• But lump sum payments are never considered as Royalties.
• The minimum rent is which is payable even if royalties based on the output is lower. The excess of minimum rent is set off. Entries are passed in lessee books when royalties are less than minimum rent. Royalty receivable account is simply reverse entries of lessee.
• Sub-lease is when the lessee leases part or complete portion of leased property to another person.