Royalty Asset Accounts
10200 Royalties Receivable (consolidated account)
- 10210 Royalties Receivable (based on actual sales reports submitted by licensees)
- 10220 Accrued Royalties Receivable (based on royalty reports for the current period received in a future period)
10500 Royalty Advances (consolidated account)
- 10510 Royalty Advances
- 10520 Allowance for Uncollectible Advances (contra-account)
10600 Unearned Royalties (consolidated account)
- 10610 Unearned Royalties
- 10620 Allowance for Uncollectible Royalties (contra-account)
Royalties receivable reflects the amount due to the company from licensees (rights buyers) of your intellectual property.
For the year end financials it is common practice to accrue royalty earnings for the year based on royalty receipts and sales reports received in the first few months of the new year.
Example: In January 2014 the licensor receives a royalty payment from a licensee for sales made in 2013. The licensor recognizes this revenue in 2013 and recognizes a receivable as of the 2013 year end.
Note: Rights income is reported net of the royalty expense. This means that rights income is the royalties receivable less the royalty payable due on the rights income.
|Rights Income (Net)||$100|
Royalty advances account shows the current balance of advance payments made (to the royalty beneficiary) against future royalties. The royalty advance balance is reduced as advances are deducted against royalty earnings.
Allowance for uncollectible advances account is an allowance for royalty advances that will not be earned out due to the project being canceled, authors not submitting the manuscript, or earned royalties not fully covering the royalty advance. This contra asset account reduces the balance of the parent account.
Unearned royalties reflect the negative royalty statement balances that arise when returns exceed sales. In this case the royalty beneficiary owes the publisher; the licensee.
Allowance for uncollectible royalties reduces the net amount of unearned royalties (unearned royalties + unearned royalties reserve) to the amount that the publisher expects to collect from royalty recipients. For unearned royalties the amount of the allowance is equal to the balance of the unearned royalties if the book (product) is out of print and the publisher does not expect to recoup the unearned royalties from the royalty recipient. This contra asset account reduces the balance of the parent account.