Question

What is a memo entry in the general journal and why might a CEO make extensive use of them?

Answer 1

A memo entry in the general journal is the entry without debit or credit amounts. It is totally different from regualar journal entry which has atleast one debit and one credit.It is infact in the form of a short message entered into the general journal. A CEO might make extensive use of them because there are several scenarios or transactions during which it may not possible to record them into the form of debit or credit (i.e. in the way normal journal entry is recorded) but the note related to the transaction may be necessary for the future reference. For example, during stock split the number of outstanding shares increases but there is no change in the balance of Common Stock account, so in this case there is no need for complete journal entry. In this case a memo entry is used in the form of short message stating the stock split and change in number of outstanding shares.