A good way to think about this concept (to me) is that it's just like any other accruing of revenue….
Say you have a 10% royalty on all sales of a book you wrote above $100,000 for the year 20xx. In this year, your book had $200,000 worth of sales. Say also, at the beginning of the year the publishing company that pays you this royalty prepaid you $5,000 at 1/1/20xx. You would then have the following:
1/1/20xx:
Debit: cash $5,000
Credit: Uneared Royalty Income: $5,000
12/31/20xx:
Debit: Unearned Royalty Income: $5,000
Debit: Royalties Receivable: $5,000
Credit: Royalty Revenue: $10,000
At the end of the year when you know the amount of royalty you are owed and have earned (In this case, 200,000-100,000 = $100,000. $100,000 x 0.10 = $10,000 earned.) you would simply move the unearned revenue to earned and also record a receivable for the remainder of the amount, and record the earned revenue for the full amount as noted above.
I hope this Helps.
BEC - 76 7/22/14
AUD - 84 8/30/14
REG - 75 10/16/14
FAR - 87 11/24/14
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