How to record royalty fee in accounting book

[mamconon]

I am working as an accountant in Japanese Co located in Singapore.
We have signed the contract with holding Co in which we have to pay the royalty fee to parent Co at the rate 5% of net sale each month.

Please help me to recognize this fee in accounting book.
Thank you much!

 

[TimCaprica]

Assuming you are using some sort of accounting software you should juist make a new nominal ledger account called something like "Royalties - Intercompany" and the post the expense to there as you normally would with any other expense.

For your purposes it is just a normal expense. The only complication will come if your accounts need to be consolidated into the holding company accounts later, in which cause the parent accountants will just need to know that the royalties need to be offset against the income they receive. Hope that makes sense.

Tim
Caprica Online Accountants