Memorandum Balance Sheet
For preparing Realisation Account, Balance Sheet is necessary.
If it is not given in the question, it must be prepared.
Balance Sheet prepared from the given information is called Memorandum Balance Sheet.
It is prepared on the basis of normal Balance Sheet Equation i.e.
Capital + Liabilities = Assets
- Usually, missing information is Sundry Assets (balancing figure) on Asset side.
- If however assets besides cash are given, then cash is the balancing figure.
- If, cash is given and both the sides are not equal, then the difference is Accumulated losses or profits depending on the side of the balance sheet.
After preparing the Memorandum Balance Sheet, Follow the usual procedure of preparing Realization account and other related accounts.
The most important point relating to the accounting procedure of realization is that, in the end the balance in all the ledger accounts become nil.
The final payments/receipts to/from partners should make the bank balance nil.
Check your Understanding
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