Royalties Received

This Sales code records income the business earns from royalties received. As an income account, it normally carries a credit balance: credit entries increase the balance (recording new income) and debit entries decrease it (for example, a credit note issued to a customer).

Real-world examples

Franchising (royalties from franchisees)

A franchisor receives an ongoing royalty from each franchisee, calculated as a percentage of their turnover — 6% is common — on top of any upfront franchise fee. A franchisee reporting £40,000 of quarterly turnover generates a royalty invoice of £2,880 (£2,400 net, £480 VAT): a debit of £2,880 to 1100 (Debtors Control Account), a credit of £2,400 to 4901 (Royalties Received), and a credit of £480 to 2200 (Sales Tax Control Account). Because the royalty is turnover-based rather than a fixed fee, franchisors typically build in an audit right to check the reported figures are accurate.

Music and media (rights collected via a licensing body)

A songwriter or rights-holder often doesn't invoice for royalties directly — a collection society such as PRS for Music collects licence fees from broadcasters, venues and streaming platforms on their behalf, deducts its own commission, and pays out the net amount. A quarterly statement showing £850 gross less £127.50 commission, paying out £722.50, is recorded as a debit of £722.50 to 1200 (Bank), a debit of £127.50 to a fees/commission expense code, and a credit of £850 to 4901 — recognising the full royalty earned even though only the net amount actually lands in the bank.

Commonly confused with

Because code 4900 (Miscellaneous Income) sits right next to this one in Sales, it's a common mis-posting target. Code 4901 is specifically for royalties received, while 4900 covers miscellaneous income — similar in nature, but keeping them separate is what makes the sales section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

A sale posted to the wrong Sales code won't change total turnover, but it will distort the sales analysis used to see which products, services or channels are actually driving revenue.

Other codes in Sales