Question

4. Define Royalty. Write imaginary accounts in the books of landlord
and lessee.​

Answer 1

For the lessor, royalty is ordinary business income. Royalty received on the basis of output is credited to Trading or Manufacturing A/c. Whereas, royalty received on the basis of sales is credited to Profit & Loss A/c.

Minimum Rent is the amount that has to be paid by the lessee to the lessor whether or not he has derived benefit from the asset. Hence, it is also called Dead Rent or Rock Rent.

Lessor may allow the lessee the right to recoupment of short-workings. In this case, the lessor will receive only the minimum rent until the period of recoupment. The entries below are done assuming that the lessor has allowed right of recoupment to the lessee.

Answer 2

Answer:

Royalty is what a lessee pays to a lessor for the use of any rights, copyrights, franchises or any such asset. It is the system of sharing of revenues between the lessee and the lessor. Darmaidayxx and 2 more users found this answer helpful.