What Is a Debit Memorandum, Exactly?
Nov 28, 2023 By Triston Martin

Documents that record and notify customers of debit changes made to their bank accounts are known as debit memorandums or "debit memos." The funds in the account are reduced due to the adjustments, but they are only utilized for adjustments that are not part of typical debits. Debit memoranda can be issued for various reasons, including bank fees, undercharged bills, or to correct an account's unintentional positive balance. A credit memorandum is the polar opposite of a debit memorandum.

A Debit Memorandum's Meaning

When a bank customer's account balance is reduced because of fees and other connected charges, products or services are under-billed to a buyer, or an internal offset to a small credit balance in a customer account, a debit note is generated. Bank transactions, incremental billing, & internal offsets are all common terms for these scenarios.

The Process of Using a Debit Memorandum

Debit notes appear on a bank statement as a reminder of costs withdrawn from an account. When a bank imposes a $35 service fee on a $10,000 business checking account, the balance is lowered to $9,965, and the reduction is reported in a debit message. For example, penalties for failed or printed checks may appear on similar debit memos.

In double-entry accounting, a debit memorandum can also be used to reflect a modification that raises the amount due from a client. When lumber prices rise from $1,000 to $1,150 after a client orders it in April and pays for it, a debit memo can be issued to cover the additional $150 in lumber costs. The supplier would debit their accounts receivable by $150, while the customer's accounts payable would be increased by $150.

An Example of a Debit Memorandum

The accounting term "debit memorandum" refers to an entry informing clients of a drop in their account balance due to a modification or adjustment. In various scenarios, a debit memo is a typical occurrence in the banking business. A debit memo, for example, may be issued by a bank when fees are assessed.

Accounts belonging to customers will indeed be debited, and just a debit statement will be drafted in order to demonstrate that the charge is just an adjustment instead of a transaction. When an inaccurate account balance has to be corrected, a debit memo might be utilized. Return check fees, insufficient funds costs, interest fees, check printing fees, bank equipment rental fees, and corrections to improper deposits are all common debit memos in banks.

Different Types of Debit Memorandums

Statements with Debit Memos

Debit memos can be used to reduce an account's balance for a variety of reasons. Insufficient funds, overdraft fees, bank service costs, and check printing fees are a few reasons a bank might remove money from an account.

Debit Memo As Internal Offset

A debit note might be sent when a consumer overpays to cover the difference. The accounting department can send the note back to the customer to complete the transaction. A debit memo can also remove an overage from a customer's account if the overage results from an accounting error that leaves a residual balance.

Debit Memos In Incremental Billing

A debit note with the incremental adjustment may be sent if an original invoice is submitted with an amount too low. Because most firms reprint an invoice with the revised amount, this approach is uncommon.

Transactions at a Bank

An account customer is sent a debit memorandum in retail banking when their account balance is reduced for reasons other than cash withdrawals, check cashing, or debit card usage. Bounced checks, overdraft penalties, and the cost of printing additional checks are all examples of situations in which debit memos may be issued. Customers get the memoranda with their monthly bank statements, and the debit memorandum is marked with a minus sign.

Incremental Billing

A debit memo is used as an adjustment technique in business-to-business transactions when a customer's goods or services are accidentally under-billed. It's a way to fix a billing mistake. The official definition is notifying the consumer that the debit memoranda would raise their accounts payable. Debit notes may be sent to XYZ Inc., for example, if ABC Co. fulfills an order for XYZ Inc. and charges the client in an amount that falls short of the agreed-upon amount.

Internal Offset

A debit memo can be generated within a company to counterbalance a customer account's credit balance. Firms can send a debit memo if a consumer pays more than the billed amount intentionally or unintentionally. Instead of producing a debit memo, the corporation will most likely repay the consumer if the credit amount is judged significant.


Increasing income and correcting invoice values that have been incorrectly or prematurely inflated are two of its many benefits. It is also raised when an agreement is amended at the request of one of the parties.