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Join nowHi! I sell a product and have to pay a % of the gross as a royalty to artists. I am trying to figure out the best way to record this. The terms with the artists is that the royalty fee will acrrue monthly and they will get a pay out on a quarterly basis.
Ideally, I would like to make this a journal entry where the artist commissions accrued will show up on the monthly P&L. There should be some sort of liability account on the balance sheet that shows the total amount I owe, to which artist that should be cleared when I cut the check.
I am not an accountant. My business is a startup so I am handling my own bookkeeping for now. I am trying to figure out the proper accounts to do the above. Can anyone help me figure out how I would structure this journal entry?
Many thanks!!
QBO is not functional enough to do this as a one step kind of thing, sorry.
Do not use a journal entry, they often do not work as intended and are not included in some reporting.
In the chart of accounts, create
a liability account for the royalty due
an expense account for royalty paid
Create two items
Service item named royalty due
Service item named royalty paid
Use a sales receipt, manually calculate the amount of royalty to be paid out
line one, the royalty paid item and the amount
line two, the royalty due item and the amount as a negative number
save the zero dollar sales receipt
when you pay the royalty out, use the royalty due account as the expense (reason) for the payment
Do you think this will be a problem since I record all sales by journal entry?
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