File Name: royalty accounts questions and answers .zip
By Sathish AR. Royalty is a consideration received by business entities or individuals who sell their creations to a third party for use. Typically, royalty is considered to be synonymous with rent, however its concept and application varies completely. However, royalty is different from the rent paid by the user.
Personal ledger b. Debtors ledger d. Creditors ledger 2. Bought ledger account is opened in A. Creditors ledger B. Debtors ledger C. General ledger D.
The term 'Royalty' is used to denote the periodic payment made by one person called lessee to another person called lessor for using the right by the lessee vested in the lessor. For example, if X is the owner of coal mine, and instead of extracting the coal himself, he concedes this right to Y in return for amount calculated on the basis of coal extracted from the mine, such a payment is called 'Royalty'. Royalties are usually payable in the following cases: a b c For the extraction of oil, coal, and minerals from the ground To an author for sale of his books. To holder of patent rights for the use of his patent by other manufacturer. Nature of Royalty Account:- Royalty Account is nominal in the nature.
Royalty is payable by a user to the owner of the property or something on which an owner has some special rights. A royalty agreement is prepared between the owner and the user of such property or rights. If payment is made to purchase the right or property that will be treated as capital expenditure instead of a Royalty. Payment made by the lessee on account of a royalty is normal business expenditure and will be debited to the Royalty account. Royalty, based on the production or output, will strictly go to the Manufacturing or Production account. In case, where the Royalty is payable on sale basis, it will be part of the selling expenses.
BCOM 1st Year Royalties Accounts Long Question Answer Study Material Notes · 1. When royalty is payable: Royalty A/C Dr. To Landlord A/C · 2. For writing off.
The owner of an asset e. This payment to the owner by the user of the asset is termed as Royalty. We can therefore say that the royalty is the amount of consideration paid by a party to the owner of the asset in return for the right to use that asset.
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Very nice article and clear also. Get notes here of Financial accounting.
Breaking News. State whether the following statements are True or False:. Royalty is a nominal account. Royalty is a revenue expenditure to lessor. Royalty is calculated either on the basis of production or on sales.
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In this article we will discuss about the top five accounting problems on Royalties with their relevant solutions.