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socexahmed
January 17, 2022
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How to set up a royalties chart of account?

  • January 17, 2022
  • 1 reply
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We pay royalties to another company for the license. How to create a new chart of accounts for Royalties payments? I assume I could use Other Expense as the Account type in the new chart of account. But what would be the detail type?
Best answer by Pete_Mc

Royalties would typically be an Expense.  So you could simply set up something like "ABC Royalties" and that is where you would apply the payments when you make them to show the Expense.

 

If there is something different about the arrangement like they bill you annually but you only pay monthly or quarterly, then you could set up a Liability account for the initial invoice.  And then move from the ABC Liability to the ABC Expense Acct when you actually make the payments.

1 reply

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Pete_McAnswer
January 17, 2022

Royalties would typically be an Expense.  So you could simply set up something like "ABC Royalties" and that is where you would apply the payments when you make them to show the Expense.

 

If there is something different about the arrangement like they bill you annually but you only pay monthly or quarterly, then you could set up a Liability account for the initial invoice.  And then move from the ABC Liability to the ABC Expense Acct when you actually make the payments.

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    socexahmedAuthor
    January 19, 2022

    Should we prepare 1099 for Royalties paid to the vendor?

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    Pete_Mc
    January 19, 2022

    I would think so.  But that's a question for you Tax Accountant.

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