Debit Memorandum

AAA

DEFINITION of 'Debit Memorandum'

1. A document given to an account holder which states that the account balance has been decreased as a result of factors other than a cash withdrawal or a written check being cashed in. Debit memorandums can arise as a result of bank service charges or bounced check fees. A debit memorandum is typically sent out to bank customers along with their monthly bank statements.
Also known as a "debit memo", for short.


2. The adjustment procedure that occurs following a business's valid complaint against another business. For example, if Company A sends defective merchandise to Company B, a debit memorandum would be issued in order to adjust the accounting statements in terms of debits and credits.

INVESTOPEDIA EXPLAINS 'Debit Memorandum'

It is usually preferable to avoid debit memorandums from either the individual or business perspective. Individuals typically incur undesirable fees for additional bank service charges or for having a check bounce. On the other hand, there are numerous implicit costs for a business debit memorandum such as possible loss of reputation and human labor to make the necessary adjustments.

RELATED TERMS
  1. Discussion Memorandum

    Published by the Financial Accounting Standards Board (FASB), ...
  2. Activity Charge

    A fee charged to cover the servicing costs of an account. An ...
  3. Overdraft Protection

    A line of credit that banks offer to their customers to cover ...
  4. Payroll Card

    A type of bank debit card. Payroll cards draw on the user's wages ...
  5. Garbage Fees

    Unnecessary fees tacked onto mortgage closing costs by lenders ...
  6. Junk Fees

    Nebulous charges assessed at the closing of a mortgage that go ...
Related Articles
  1. What are some examples of how cash flows ...
    Personal Finance

    What are some examples of how cash flows ...

  2. What is the difference between cash ...
    Fundamental Analysis

    What is the difference between cash ...

  3. How do you calculate retained earnings ...
    Fundamental Analysis

    How do you calculate retained earnings ...

  4. What are some examples of industries ...
    Fundamental Analysis

    What are some examples of industries ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center