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socexahmed
Level 2

How to set up a royalties chart of account?

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?
Solved
Best answer January 17, 2022

Best Answers
Pete_Mc
Community Champion

How to set up a royalties chart of account?

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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3 Comments 3
Pete_Mc
Community Champion

How to set up a royalties chart of account?

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.

socexahmed
Level 2

How to set up a royalties chart of account?

Should we prepare 1099 for Royalties paid to the vendor?

Pete_Mc
Community Champion

How to set up a royalties chart of account?

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

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