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    Royalty Accounts-1

    Uploaded by

    Suhail Ahmed
    The document discusses royalty accounts, defining terms like lessee, lessor, minimum rent, short workings, and recoupment of short workings. It explains that minimum rent is the minimum amount payable irrespective of sales or production, and short workings is the excess of minimum rent paid over actual royalty calculated on sales or production.

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    © All Rights Reserved
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    Royalty Accounts-1

    Uploaded by

    Suhail Ahmed
    100 views2 pages
    The document discusses royalty accounts, defining terms like lessee, lessor, minimum rent, short workings, and recoupment of short workings. It explains that minimum rent is the minimum amount payable irrespective of sales or production, and short workings is the excess of minimum rent paid over actual royalty calculated on sales or production.

    Original Description:

    Royalty accounts theory

    Original Title

    ROYALTY ACCOUNTS-1

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    The document discusses royalty accounts, defining terms like lessee, lessor, minimum rent, short workings, and recoupment of short workings. It explains that minimum rent is the minimum amount payable irrespective of sales or production, and short workings is the excess of minimum rent paid over actual royalty calculated on sales or production.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    100 views2 pages

    Royalty Accounts-1

    Uploaded by

    Suhail Ahmed
    The document discusses royalty accounts, defining terms like lessee, lessor, minimum rent, short workings, and recoupment of short workings. It explains that minimum rent is the minimum amount payable irrespective of sales or production, and short workings is the excess of minimum rent paid over actual royalty calculated on sales or production.

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    © All Rights Reserved
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    ROYALTY ACCOUNTS

    Introduction-Meaning- Terms used in royalty agreement: Lessee, Lessor,


    Minimum Rent – Short Workings –Recoupment of Short Working–Accounting
    Treatment in the books of Lessee only – Journal Entries and Ledger Accounts
    including minimum rent account. (Sub-lease and lessor books excluded)-
    problems
    MEANING OF ROYALTY
    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.
    IMPORTANT TERMS
    1. LESSEE
    Lessor is also called as user of the asset received from its legal user. He uses the
    copy rights/ property/asset of the real owner and makes the payment of royalty
    periodically as per the agreement .
    2. LESSOR
    Lessor is also called as the real owner of the asset.
    3. ROYALTY AGREEMENT
    A legal agreement made between lessee and lessor to use the asset or copyright
    of lessor by lessee for productive or commercial operations which generate the
    revenue, under which a consideration called royalty is payable to the lessor
    periodically.
    4. MINIMUM RENT
    It is also called as fixed rent or dead rent . it is a minimum amount of rent or
    consideration payable to the lessor by the lessee for the use of asset irrespective
    of sale or production achieved.
    Minimum rent = actual royalty + short workings

    5. SHORT WORKINGS
    It is an excess amount of minimum rent paid over the actual royalty calculated
    on sales or production. It appears when the minimum rent is payable to the
    lessor and makes an amount of extra expenses to the lessee, but shall be
    recovered when amount of royalty reaches more than the minimum rent in any
    succeeding years.
    Short workings= minimum rent – actual royalty
    6. RECOUPMENT OF SHORT WORKINGS
    It is a process of recovery of short working of certain period where the royalty
    is less than minimum rent against the surplus royalty where actual royalty is
    higher than minimum rent of subsequent period.

    ROYALTY ACCOUNTS
    ANALYTICAL TABLE
    Year Output Royalty on Minimum Surplus Treatment of short workings[f] Actual
    / sales payment
    [a] production/ Rent [e] Short Short Short
    [b] workin working working to lessor
    sales [d] [c-d] g [d-c] recovered irrecovered
    [g]
    [c]

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