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Background - Memorandum

Background  — Fri 18 Mar 2022

Although the results and balance sheet are the most important reports with figures, the memorandum is the most powerful tool in any accounting system. An indispensable Swiss army knife.

The memorandum is a list of entries that, if you use it correctly, cannot be processed in any other way in your accounting system. Typically, you rarely if ever have to think about the memorandum yourself, as most of the tasks are done automatically by your digital Daxto assistant. Some business owners only visit it once a year, during the year-end closing.

But remember, if you want to arrange something special and you have no idea where you should do it, the answer is probably the memorandum. So let's see what it is and how it works.

Concrete example

We bring in fictional Bart again. Bart has a sole proprietorship. After Bart files his sales tax declaration, it turns out that he is going to receive € 100.00 back. The Belastingdienst then transferred this to Bart's private account. This can happen. No big deal, because Bart knows how to correct this with a memorandum booking.

This solution is fully explained in this article, should it happen to you. For an example of how the memorandum works, take a look at the following booking:

Category Debit Credit
VAT paid and/or received (Betaalde en/of ontvangen BTW) 0 € 100.00
Drawdowns Bart (Opnames Bart) € 100.00 0

After Bart saves this corrective memorandum booking, his accounting is back in order. This way the accounts understand that the amount to be received came in, even though it was not deposited in the business account, but somewhere else. Bart's drawdowns from his business are increased by exactly the amount that should have been returned, as if Bart himself chose to draw it down from his business and deposit it into his private account.

If you are wondering how Bart knew which amount should be credit and which amount should be debit, read this article. Finally, it would be helpful if Bart would just provide the Belastingdienst with his business account number, otherwise he will have to make another memorandum booking like this for the next refund.

The memorandum was used here to transfer value within accounting. Sometimes you are simply transferring an amount between two categories. The example above is for a situation that is a tad more difficult to understand. Yet the booking in the memorandum is simple, with only two lines. That's why the memorandum is so powerful.

Typical items for the memorandum

Your Daxto assistant automatically books some things in your memorandum for you, such as:

  • entering a closing balance after you have done a year-end closing;
  • automatically processing rounding correctly after a sales tax declaration;
  • automatic depreciation on investments;
  • marking sales invoices as doubtful or bad.

But you can also work in it yourself. Very concretely, for example, to arrange the following:

  • Entering your first balance sheet; the opening balance.
  • Distributing results at the end of the year; the year-end closing. Your assistant automatically prepares this for you.
  • Correcting and/or offsetting minor discrepancies, such as replenishing underpaid invoices from the 'betalingsverschillen' category.
  • Booking costs for electricity that will not be billed until a subsequent fiscal year. These costs must, of course, be estimated and booked in the correct time period even before you receive the invoice for them.
  • Accounting for social charges, such as payroll taxes in the case of staff.

That was the whole gist

And that brings you to the end of the background series 'The essence of accounting'. For completeness, below you will find its table of contents one more time.

With this knowledge under your belt, you can get started with Daxto. It's time to add your first relationships, and start entering invoices. And if you still have questions, check out the rest of the help articles. There are many more. You can also save them for later until you need them. See you then!

The essence of accounting

This background article is part of the series 'The essence of accounting'. It doesn't say anywhere that it is forbidden to read them all.

  1. Accounting
  2. Accounting terms
  3. Balance sheet
  4. Results
  5. Memorandum (this is where you are now)