Hence, no supporting evidence like Invoice/GRN can be generated. However, there is no involvement of the cash/liability/asset or any other aspect of the accounting in the announcement as there is no impact on the valuation of the equity in the financial statement. The Company needs to update its internal record to reflect the stock split. Suppose the Company’s current share price is $120 and the Company announces a stock split of 4 for 1. The message in the memorandum is entered in the ledger for tracking purposes of the updates made in the accounting record.Įven though there may not be any update in the accounting ledger, the memorandum is one of the essential documents and needs to be recorded as notes in the ledger for better record-keeping and control purposes. Definition:Ī memorandum in accounting refers to a document with a short message to be entered in the general journal and the general ledger account. However, sometimes things do not work as planned, and some corrections need to be made in the books of accounts that need some form of evidence/memorandum to ensure compliance with the internal controls and the accounting principle of full disclosure (especially if some material adjustment is to be made).Īttachment of memorandum with some correction/update in the ledger helps document the cause of the update and can be traced when the accountant proceeds to prepare the financial statement.įurther, an accountant may need to disclose the facts/impacts of the memorandum in the notes to the financial statement if they perceive details of the memorandum impact on the user of the financial statement (Principle of materiality). These documents may be internal/external depending on the nature of the transaction posted in the accounting system. Some documents are generated to support the transaction when the business performs some activity. This procedural formality is implemented to bring an element of reliability to the users of financial statements. Authorized and approved supports must support accounting entries.
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