Page 188 - Accountancy_F5

Accounting entries
The following are the accounting entries of royalty transactions in the books of lessee:
SN Narrations Details

When royalty is less than the minimum rent and the minimum rent account is
not maintained:
FOR ONLINE READING ONLY
1. When production is Dr Royalty payable account xx
made or royalty is Dr S/workings recoverable account xx

due Cr Lessor account xx
LANGUAGE EDITING
With the minimum rent payable to the lessor
LANGUAGE EDITING
2. When payment is Dr Lessor account xx
made Cr Bank account xx
With the amount paid
3. Closing the royalty Dr Statement of P/L/Manufacturing account xx
account Cr Royalty payable account xx
With the balance of the royalty payable account

When the Royalty is less than minimum rent and the minimum rent account is
:maintained
1. When production is Dr Royalty payable account xx
made or royalty is Dr S6/workings recoverable account xx
due Cr Minimum rent account xx
With the minimum rent payable to the lessor
2. Identifying the Dr Minimum rent account xx
amount payable to Cr Lessor account xx
the lessor

3. When payment is Dr Lessor account xx
made Cr Bank account xx
With the amount paid
4. Closing the royalty Dr Statement of P/L |Manuf. account xx
expense account Cr Royalty payable account xx
With the balance of the royalty expense account

Student’s Book Form Five
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