What is the normal manner in which royalties would apply?
It would form part of the company’s expenses or cost of sales. If the “royalties paid” is based on sales then it would form part of cost of sales. However you would have to understand the terms of the agreement in order to be clear.
I would suggest for now just ensure that all payments are allocated to a “royaties paid” account.
Once you have all the information I suggest you check with the company’s auditors as they will be the ones doing the final allocations (assuming the company will be audited).
Hope that helps!
Don’t forget that I’m here to answer your questions about the ICBA, or just queries about your accounting at work. All you have to do is email me with a copy of your ICBA membership certificate. Not yet a member? Send in your application form!