Accounting > QUESTIONS & ANSWERS > MCQ - Royalty Accounts | Multiple Choice Questions and Answers | PAPER 5 FINANCIAL ACCOUNTING | CMA (All)

MCQ - Royalty Accounts | Multiple Choice Questions and Answers | PAPER 5 FINANCIAL ACCOUNTING | CMA MCQ - Dynamic Tutori…

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State whether the following statements are True or False: 1. Royalty is a nominal account. True 2. Royalty is a revenue expenditure to lessor. Fal... se 3. Royalty is calculated either on the basis of production or on sales. True 4. Royalty paid on sales is debited to P/L Account and Royalty paid on production is debited to Manufacturing account. 5. Shortworkings is the excess of minimum rent over royalty. True 6. Surplus is the excess of royalty over minimum rent. True 7. Shortworkings recoverable in future are shown in the balance sheet on the assets side so long as they are recoverable. True 8. Shortworkings not recouped is debited to P/L Account. True 9. When shortworkings is recovered debit is given to either royalties account or landlord account. True 10. When there is no provision for recoupment of shortworkings, then shortworkings of each of the years is to be treated as irrecoverable shortworkings and hence transferred to prot and loss account. True 11. Recoupment of shortworkings can be restricted or unrestricted. True 12. Lump sum payment for purchase of patent, mine or book is known as Nazrana, Lease premium or Goodwill. True 13. Lump sum payment for purchase of patent, mine or book is not royalty, it is an asset which is shown in the balance sheet. True 14. Ground rent or surface rent in the rent payable by the lessee in addition to minimum rent. True 15. When the shortworkings become irrecoverable, the same are debited to the Trading Account. False 16. Royalty account is closed by transferring it to the landlord’s account. False 17. Unrecouped royalty suspense is to be transferred to Lessee's A/c in the books of lessor. 18. Minimum rent is also termed as dead rent. True 19. When the lessor receives payment, he credits royalty A/c. False, Lessee’s Account 20. The excess of minimum rent over the actual royalties is known as rock rent. False, Redeemable dead rent 21. When royalty is paid, it is debited in the books of Lessee to royalty A/c. False, Lessee Account 22. When shortworkings are recouped, the account to be debited in the books of lessee is landlord A/c. True 23. The balance of royalty receivable account is transferred to royalties suspense A/c. False. Prot and Loss Account 24. When the royalty agreement does not contain a clause for minimum rent, the question of short workings and [Show More]

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