BCOM 1st Year Royalties Accounts Short Question Answer Notes

BCOM 1st Year Royalties Accounts Short Question Answer Notes :- Sample Model Papers Notes examination papers unit wise Chapter wise Syllabus of the content chapter wise notes. available in over site parultech.com

BCOM 1st Year Royalties Accounts Short Question Answer Notes
BCOM 1st Year Royalties Accounts Short Question Answer Notes

Section A


Q.1. What do you mean by royalty? Define. 

Ans. Royalty is the remuneration payable to a person in respect of the use of an assets whether hired or purchased from such person, calculated by reference to and varying with quantities produced and sold as a result of the use of such assets. Thus, the term ‘Royalty’ is used to denote the periodic payment made by a person called lessee to another person called lessor (or landlord) for use of rights vested in the later (lessor). Amounts paid by the lessee to the owner of the mine, by the manufacturer to the patentee for the use and apply his patent or by the publisher to the author of the book for reproducing his books are the main examples of royalty. In fact, it is a payment by the user to the owner for allowing him to use his right or privilege. The main definition of royalty is as follows:

“The term royalty expresses an amount payable by one in return for some special right or privilege conceded to him by another person, such as the right to publish a book or to manufacture and sell a patented article or to work a mine.’

It may be said in simple words that the amount payable according to mutual agreement on the basis of prescribed terms and conditions for consideration of use of any special rights during a definite period is treated as royalty.

Q.2. Explain the various kinds of royalty.(2014) 

Ans. There are many types of royalties but following types of royalties are very popular:

1. Mining Royalties: Mining royalties are paid for extracting goods from mine like coal, minerals and other goods.

2. Brick-making Royalties: Brick-making royalties are paid for raising clay from the land acquired on lease.

3. Oil Wells Royalties: When oil is taken out from wells, oil extracting company gives royalty to the owner of the well.

4. Copyright Royalties: Copyright royalties are paid to an author of a book who gives his bo for publication to a publisher. It may be lump sum payment and/or a certain fixed percentage on amount of books sold.

5. Patent Royalties: If a person gets his product patented under law, he acquires sale right production and sell. He may also delegate his right to someone. The royalty paid by patent use owner is called patent royalty.

In addition to the above, trademark royalties, machine royalties and foreign companies roy are also the types of royalties.

Q. 3 What is the difference between rent and royalty?

Ans. Difference between Rent and Royalty 

1. Rent is the consideration payable for the use of some tangible de machinery, etc. while royalty is the consideration payable for the use

e for the use of some tangible assets like building and tangible or intangible assets.

2. Rent is mostly payable according to time as per day, per wweek, per month or per year, etc. but payment of royalty depends on yield or production, etc. 

Q. 4 What do you mean by minimum rent? 

Ans. Minimum Rent: Royalty agreements usually contain a clause for the payment of a fixed minumum amount as toyalty each year, irrespective of the bebefit derived by the lessee out of the right or property rented out to him by the landloard. Such minimum amount is known as minimum rent, dead rent, fixed rent, flat rent or contract rent.

Thus, minimum rent is the amount below which landlord never accepts in any year from the person who has to pay the royalty in case of mines. If in any year amount of royalty is less than the amount of minimum rent which will be payable by the person who has to pay the royalty, but if the amount of royalty is more than the amount of minimum rent, royalty w The intention in fixing the minimum rent, is to avoid loss, which may occur if less amount on any there than the normal one. 

Q.5. What is shortworking? (2016) 

Ans. Shortworking: When the amount of royalty calculated on the basis of production or sales falls short of the minimum rent, lessee has to pay the minimum rent to the landlord, the excess of minimum co minimum rent over actual royalty is called ‘Shortworking’. Shortworking = Minimum rent – Actual royalty For example; Suresh leased a mine from Mahesh at a minimum rent of 20,000 per annum and a royalty of 5 per tonne. If for instance, Suresh could raise 3,500 tonne in a year, then the actual royalty will be *17,500 (3,500 tonnex 5). Suresh has to pay 20,000 of minimum rent as royalty is less than minimum rent and there is a shortworking of 2,500 (20,000 – 17,500). 

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