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SN Narrations Details

5 To record royalty Dr Royalty receivable account xx
payable by lessee on Cr Royalty payable account xx
sub-lessees’ production With the value of sub-lessee’s production valued at the rate
charged to the lessee by the lessor
FOR ONLINE READING ONLY
6 To record profit on Dr Royalty receivable account xx
sub-lease at the end of Cr Statement of P/L xx
LANGUAGE EDITING
each year With sub-lessee’s production valued at the difference
between lessee rates and land lessor’s
LANGUAGE EDITING
7 To record short Dr S/workings allowable account xx
workings irrecoverable Cr Statement of P/L xx
in future by sub-lessee With short working irrecoverable by the sub-lessee as at

the year-end

Ledger accounts in the books of sub-lessee
Ledger accounts and journal entries in the books of sub-lessee will be the same as those

recorded by the lessee in relation to his lessor. The sub-lessee will act as the lessee
while the lessee will now be the lessor to the sub-lessee.
Example 6.10
Namanga Ltd. acquired rights from Basco Ltd. to manufacture and sell a certain
brand of perfume on the following terms:
(a) Royalty shall be paid on the number of bottles manufactured at TZS20 per
bottle;
(b) The minimum royalty in any one year shall be TZS500,000;
(c) Short working will be recouped within one year following the year of short
workings;
(d) The agreement to become effective on 1 July 2020 and
st
(e) All settlements were made on 31 December, of each year.
st
On 1 January 2021 Namanga Ltd. granted rights to Tumaini Ltd. to manufacture and
st
sell the same perfume on following terms:
(i) Royalty shall be paid on number of bottlers manufactured at TZS30 per bottle,
(ii) Minimum royalty in any one year shall be TZS200,000,
(iii) Short workings will be recouped only in the year following the year of short
workings.

Student’s Book Form Five
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