What Is a Debit Memorandum? Types of Debit Memorandum

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What Is a Debit Memorandum? There is no doubt that you might have heard about a debit memorandum before. The only thing is that many people that have heard of this word do not know what it means. If you do not know what a debit memorandum is, then you are reading the right article. In this article, I am going to be explaining to you the meaning of a debit memorandum or debit memo.

What Is a Debit Memorandum?

The sole reason for this article is so that you can understand what a debit memo is, so that the next time you hear of it, you will be able to know what they are talking about. I am also going to show you how a debit memorandum works, the types of a debit memorandum, and so much more in this article today.

What Is a Debit Memorandum?

A debit memorandum, or a debit memo, is simply a notice that is used by financial organizations to inform customers about a decrease in the balance of their accounts. When something has occurred that has led to a decrease in the balance of a customer account, a notice is sent to that customer. That notice is what is called a debit memorandum or debit memo.

It is basically used to inform customers about adjustments other than a typical transaction so that they can know what is going on in their account. Debit memos can also be described as documents that record and notify customers of a debit adjustment that was made to their account. The adjustment has to have caused a decrease in the account balance of the customer for it to be considered a debit memorandum.

How Does a Debit Memorandum Work?

When a bank takes a fee from a customer’s account and issues a notice, it is considered a DM. A debit memorandum is only made when a fee is deducted from a customer’s account and not when a transaction is made.

This fee is what is recorded as a DM in the customer’s account, indicating that the bank has deducted an amount from the customer’s account. Debit memos are basically used for adjusting imbalances or incorrect accounts. A debit memo may include returned check fees, insufficient funds fees, interest fees, fees for printing checks, bank equipment rental fees, and adjustments to incorrect deposits.

Types of Debit Memorandum

They are basically different types of DM that can be sent to customers using a bank account. When you see a debit notice for a memorandum in your bank statement, you do not need to panic. All you need to do is to take a look at it to know what its purpose was. That being said, below are the types of DM that are available:

  • Debit Memos on Bank Statements: This is when a bank deducts a bank fee from a person’s account, which is the reason for a decrease in the person’s account balance. The bank fee can be basically for insufficient fund overdraft or any other fee.
  • Debit Memos as Internal Offsets: In this case, a customer might have paid too much for a particular theme or item, which has resulted in an imbalance or incorrect bank account. When this happens, the bank account will be corrected and the extra amount either be returned or deducted.
  • Debit Memos in Incremental Billings: This is when you have received an original invoice with an amount that was too low for a particular transaction. When the correct memo is issued with the incremental correction made, the agreement will be deducted from the account. That increment is called a “debit memo incremental billing.”

What is the Difference Between a Debit Memorandum and Credit Memorandum?

A customer can be notified of both a debit memorandum and a credit memorandum depending on what has occurred. Memorandums typically notify a customer that there is a change in the account balance of that customer. That being said, what is now the major difference between a debit memorandum and a credit memorandum?

To find out the differences, take a look at the below options:

  • The one and the only difference between a DM and a credit memorandum are that the first one notifies of a reduction in the account balance. while the last one notifies the customer of an increase in the account balance.
  • A debit memorandum in invoicing also increases the amount the buyer owes the seller, while a credit memorandum decreases the amount the buyer or the seller.
  • Payment must be remitted under a DM, while buyers can make use of credit for future purchases with a credit memorandum.

Is there any importance to a Debit Memorandum?

The importance of a DM cannot be overemphasized. One of the reasons why most people do not like making use of bank accounts is because of the fees that are always debited by the banks. This is why it is important to keep track of how much is in your account and how much the bank is charging you in fees.

FAQs

When would a DM be issued?

A DM will be issued when something has occurred in a customer’s account that led to a decrease in the account balance. Anything that leads to the production of a customer’s bank account balance that is related to bank fees or other charges is called a debit memorandum.

What is the purpose of a debit credit memorandum?

The only purpose of a DM was simply to notify the customer about a change in their account balance. so that the customer would know what is going on in their account and where the charges that are on their account statement have gone to. When a customer’s account balance is reduced, a customer must want to know what happened. This is where a debit memo comes in.

What is a debit and Credit Memorandum?

A DM is a notice notifying a customer that his or her account balance has been reduced as a result of a fee. On the other hand, a credit memorandum is a notification that notifies a customer of an increase in his or her account balance.

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