In Royalty Accounts, explain what does it means “ THE RIGHT TO RECOUP SHORTWORKINGS”

March 8th, 2011 Comments off
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To avoid hardships to producers, in the event of shortfall of outputs, agreements are sometimes made to guarantee the landlord a minimum rent.

Such agreements often contain a provision that if the rent due ( calculated on the tonnage produced,etc) does not reach the minimum amount, the DIFFERENCE or DEFICIENCY may be carried forward and deducted from the payment of future royalties.

These agreements are referred to as a right to recoup shortworkings and usually this right only extends over a limited period.

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Financial Accounting

 
 

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