What is a Memo Entry?

A memo entry is a transaction that contains no postings to the general ledger. It is used occasionally by accountants who want to store a record of a transaction within the accounting system, for future reference. A memo entry may be used to store information about the components of a complex journal entry, or background information about why a specific journal entry was made. Many organizations elect not to use memo entries at all, preferring to instead store backup information in paper documents that are attached to manual records of journal entries made.

Characteristics of a Memo Entry

A memo entry has the following characteristics:

No monetary amounts. Memo entries typically do not involve debits or credits to monetary accounts. They are used purely for informational purposes or to maintain records for non-financial transactions.
Descriptive in nature. The entry includes a detailed description or note explaining the purpose of the memo. It might refer to an upcoming transaction, a contingent liability, or any other event that should be noted.
No financial statement impact. Since no accounts are debited or credited, memo entries do not directly affect the income statement, balance sheet, or cash flow statement.
Useful for documentation. Memo entries serve as a record-keeping tool, providing context or background for future transactions or adjustments. They help clarify events that are not captured in the financial accounts but are still important to document.
Format. While the format of a memo entry can vary, it usually includes the following:
- Date. When the memo entry was made.
- Reference number. For tracking or cross-referencing.
- Description. A clear and concise explanation of the event or note.
- Department reference. If relevant, for contextual purposes.

Example of a Memo Entry

As an example of a memo entry, a business has a stock split, where the number of shares outstanding changes, but there is no alteration of the underlying equity accounts. The entry is used to note the change in shares outstanding. An example of the memo entry is, “On [date], a 2:1 stock split occurred, which increased the number of shares outstanding from 50,000 to 100,000.”