Royalty Accounting

Royalty Accounting

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Hi. I have a client in the media sector who acts as an agent selling to the broadcaster on behalf of the artist.

The client has one control account per artist, through which they monitor the artists fund balance. When a sale is made to the broadcaster the entry is Cr Sales Dr AR. Then manually (on receipt of funds from the broadcaster) a journal is booked Cr Artist control and Dr Royalty cost for the % royalty due. Periodically when a royalty payment (or royalty advance is made) is made to the artist Cr Bank and Dr Artist control account. The process results in thousands of control accounts one for each artist.

The process is largely manual as there doesn't seem to be a dynamic link between posting the receipt for the sale and the generation of the % royalty to the artist control account.

Two questions arise.

What would be wrong with just forcing the Artist transactions through the general AP control account? Thus resulting in just one control account rather than thousands. In an ideal world there could be one single additional control account (AP and AP2 for royalties payable) but not sure if any accounting systems allow for this.

Secondly is there a way to automate the generation of the royalty liability from the point at which the sales receipt is received into the bank. Ie wouldn't want to record the liability until the cash is received. Having a manual process just results in the need for more reconciliations and proof workings.

Thanks. Zeli. 

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