Debit Memo | Definition, Uses, Examples, & Templates to Download
A debit memo is one of the most important types of invoices. It is issued in many commercial transactions to inform the buyer, the seller, or bank customer of an adjustment in his bank account balance. Let’s dive in and learn more.
What is a Debit Memo?
A debit memo is an accounting document issued in commercial transactions. Traders use it for financial adjustment, not a typical transaction. It is issued by either the buyer or the seller when the other party owns money after the payment has been made.
A debit memorandum notifies the bank account owner that an adjustment has to be made or had been made to their account. It reduces the value of the fund.
There are several relatively similar terms that refer to the debit memo: Debit Memorandums and Debit Notes. The three terms mean basically the same thing.
When to use Debit Memo?
It is used when an additional fee has to be applied for some reason:
- Items were not included in the primer invoice by mistake.
- Items prices increased when the customer charged upfront but other changes occurred in material price or labor costs. There are several cases similar to this.
- A previous credit memo was issued and the customer now wants a money-back.
Examples of Debit Memo?
One example of a debit memo is when a seller issues a credit memo to decrease the invoice total payment. If the buyer had paid the invoice, he issued a debit note to request his money back.
On the other hand, if the sellers want an extra fee, for several reasons, after a buyer paid off the invoices. The seller would issue a debit note to the buyer telling him there is another fee for a certain increase in the total cost of the product or service.
What are the types and uses of Debit memorandums?
There are three main types of debit memos based on their uses. These debit note types are:
- Debit notes are used in incremental billings.
- Memos that are used in your internal offsets.
- Memorandums are issued for and by bank transactions.
A Debit Memo Used in Incremental Billings
One of the types of debit memos is the ones that are used in incremental billings. It is an alternative to low-rated invoices. It is an incremental debit that should be included in the main invoice.
A Debit Memo Used in Internal Offsets
If a customer overpays an invoice or an error happened leading to paying more than the required payment. You issue a debit note to return the payment offset to the customer. The customer would either receive or his applicable state government.
Debit Memorandums Used in Bank Statements
For bank fees, the bank issues a debit memo to their customers to notify them of debit adjustments made to their bank account. The bank has to charge them for a certain service. This memo has nothing to do with a balance change due to cash withdrawal with checks or debit cards.
For example, if you have $10.000 in your bank account while the bank needs to charge you $100. The bank issues a bank debit note charging you with the fee for a specific service and your balance now has become $9.900.
The Difference Between Debit Memorandum & Credit Memorandum
Debit memos and credit memos are closely related to each other. Although a debit note adds an extra payable amount to the original invoice. The credit memo cuts off the total amount of the original invoice to a certain extent.
Both notes notify customers about a change in their account balance either by increase or decrease.
|Debit Memo||Credit Memo|
|If it was issued to the seller. It informs the seller that he has to return a certain amount of money to the buyer.||If it was issued by a seller. It informs the buyer that the total payment of the invoice decreased.|
|If issued to the buyer or a customer. It informs the customer that he has to pay an extra fee other than what was expressed in the original invoice.||No buyer can issue a credit memo|
|When a bank issues it. It notifies the customer of a deduction in his balance.||It was issued by the bank. It decreases the deposited amount and increases the depositor’s account.|
|When issued. The receiver has to remit the payment right away.||When issued. The receiver could either issue a debit memo or just use it to offset future payments with the other party.|
|The sender records the transaction as a future increase in his bank account balance. The receiver records it as a deduction in his bank account balance.||The sender records the transaction as a deduction in his bank account balance. The receiver records it as a future increase in his bank account balance.|
Debit Memo Templates To Download
Here are some basic Debit memo templates to download. They are available in Microsoft Word, PDF, and Google Docs.
Pick the preferred template:
- Debit memo template in Microsoft Word.
- Download the debit memo template in Google Docs.
- Debit memo template in PDF.
Note: You need to make a copy of the Debit memo/Debit note in the Google Docs in your google drive account to start using the template. For the other formats, you just need to download and enjoy editing.
- July 2022
- June 2022
- May 2022
- April 2022
- February 2017
- November 2016
- October 2016
- July 2016
- June 2016
- April 2016
- March 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2014
- October 2013
- August 2013
- June 2013
- May 2013
- January 2013
- December 2012