Question

Select the most appropriate alternatives from those given below

Royalty on production is a __________ expenses.
a) direct
b) indirect
c) capital
d) non of them

Answer 1

Royalty on production is a direct expense.

Explanation:
Royalty on production is the amount paid to the owner for using his/her rights. Royalty on production is paid at the time of manufacturing goods and, thus, it increases the cost of production. Hence, it is classified as a direct expense and is debited to the Trading Account.