What Is a Debit Memorandum?

A debit memorandum, or debit memo, is a document that records and notifies a customer of a debit adjustment made ꦓto their indiv⛄idual bank account.

The adjustment made reduces the funds in the account. Debit mem🌊os have specific purpose🥃s and are used only for adjustments beyond normal debits.

The reasons a debit memorandum may be issued relate to 澳洲幸运5官方开奖结果体彩网:bank fees, incorrectly p🌳repared invoices where the amount owed should be greater, and rectifying accidental positive balꦕances in an account.

Understanding a Debit Memorandum

A debit memo is issued in three general cases:

• When a bank customer's account balance is reduced due to fees and other service charges
• When a business under-bills a buyer for goods or services purchased
• When a business makes an internal offset to a minor credit balance in a customer account

These situations usually are referred to as bank transactions, incr🌠emental billing, and internal offsets, respectively.

Bank Transactions

In 澳洲幸运5官方开奖结果体彩网:retail banking, a debit memorandum is provided t﷽o an a♏ccount holder to indicate that an account balance has been decreased due to a reason other than a cash withdrawal, a cashed check, or use of a debit card.

Debit memos can arise as a result of bank service charges, 澳洲幸运5官方开奖结果体彩网:bounced check fees, or charges for printing checks.

The memos typically are shown on bank customers' monthly bank statements; the debit memorandum is noted by a negative sign next to the charge.

Incremental Billing

In business-to-business transactions, a debit memo is an adjustment procedure following an 澳洲幸运5官方开奖结果体彩网:inadvertent under-billing of gඣoods or services purchased a customer. It is intended❀ to correct a billing error.

The business notifies a customer that the debit memorandum will increase what they owe and change their 澳洲幸运5官方开奖结果体彩网:accounts payable. For instance, if ABC Co. fills an order for XYZ Inc. and invoices it for an amount that is short of the agreed-upon price,♑ ABC Co. will issue a debit memo to XYZ Inc. to indicate the under-billing and to explain the correct amount due.

Internal Offset

A debit memo can be created by a firm's accounting department to offset a credit balance that exists in a customer's account.

If a ꦜcusto𝄹mer pays more than an invoiced amount, intentionally or not, the firm can choose to issue a debit memo to offset the credit and eliminate the positive balance.

If the credit balance is considered material, the com൲pany most likely will issue a refund to the customer instead of creating a debit memo.

The Bottom Line

A debit memorandum represents an action taken b𓃲y a bank or other business to alert a customer to a decrease in their account balance and the reason for it. The debit memo can clarify for the customer that the change in their available funds is due to, for example, a bank fee and not a transaction that the customer made.