Memorandum Balance Sheet: A balance sheet as we know is a statement (i.e. prepared at a certain point of time) listing all assets and liabilities of the firm. It is prepared using the equation: Capital + Liabilities = Assets
Sometimes, at the time of dissolution of the firm, the balance sheet is not given. But as it constitutes a vital part of the Final accounts we thus prepare a Memorandum Balance Sheet wherein, following the above equation we arrive at the missing figure which is usually our Sundry Assets. The term sundry assets are used instead of any specific asset because the type of asset cannot be determined with certainty hence the name.
However, sometimes it may happen that the Sundry assets are given in the question then in that case cash is our balancing figure. If, cash is given and the two sides do not match then in that case depending on the side of the balance sheet accumulated profit or loss becomes our balancing figure.
Once, the memorandum balance sheet has been completed we prepare the realization account the same as under a normal case.
Example: Rima and Rekha are partners in firm sharing profits and losses in the ratio of 3:2. They have mutually agreed to dissolve the firm as of 31st March 2018. On the date of dissolution, Rima’ Capital was Rs. 1,20,000, and Rekha’s capital was Rs. 13,500. Bills Payable amounted to Rs. 22,460 and Cash Rs. 3,560. Remaining Assets realized Rs. 1,00,000 and expenses on account of dissolution were Rs. 1,180. Both Rima and Rekha are solvent.
A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.
Accounting software is an integral part of the computerized accounting system. The accounting software should be selected after considering the level of skill and proficiency of the accounting professionals.
Accounting Reports: When the collected data is processed and manipulated in a useful sense that can be understood by the users without any ambiguity, then it becomes information.
Transaction Processing System (TPS) refers to a computerized system that records, processes, validates, and stores routine transactions that occur in various functional areas of a business on daily basis.
In the case of Hidden Goodwill, the value of goodwill is not mentioned at the time of admission of a new partner. It can be considered as one of the methods for calculating the value of goodwill of the firm.