In terms of accounting, 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. A royalty is compensation paid in exchange for the use of intellectual property or natural resources. The royalty is typically computed as a percentage of the sales or profit proceeds generated from the use of these assets. Royalty Receivables means the proceeds of and payments due or to become due by any receivables obligor under each of the subject license agreements, including any additional royalty receivables but not amounts attributable to payments by receivables obligors in respect of items reimbursable to the licensor. It is a nominal account and at the end of the accounting year, balance of Royalty account need to be transferred to the normal trading and profit and loss account. Royalty, based on the production or output, will strictly go to the manufacturing or production account.

John U

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