royalties accounting

Royalties accounting involves recording payments made for the right to use someone else’s intellectual property, such as patents, trademarks, or copyrighted works. When a company earns or pays royalties, they must properly recognize these amounts in their financial statements. Revenue from royalties is recorded when earned, and expenses are recognized when incurred, following accrual accounting principles. Accurate royalty management ensures transparency, complies with legal agreements, and reflects the true financial position of a business. Proper accounting also involves tracking the amounts owed and paid, ensuring correct reporting for both the company and its licensors or licensees.