Debit Memorandum (Memo) Definition
A debit memorandum or memo is a form or document, sometimes called a debit memo invoice, that informs a buyer that the seller is debiting or increasing its amount in the accounts receivable, thus increasing the amount of the buyer’s accounts payable due to extenuating circumstances.
Debit Memo Meaning
A debit memo is often issued when a seller has not billed or charged enough to the buyer, or it might come from another error or any other factor requiring an adjustment. When a seller issues a debit memo, it is normally required that the seller give specific details why the current memo is being issued. A debit memo pertaining to banks, called a debit memo bank statement, informs a depositor that the bank will be decreasing that particular account from something other than a debit or check payment. This is usually a bank service charge of some sort.
Debit Memo Example
Cindy works for Fluffy Stuffs Inc., a toy company specializing in the manufacture of stuffed animals. The company has recently sold a large shipment of stuffed animals to Toys N’ More. Cindy billed the company for the stuffed animals sold, but worked off of an old pricing sheet to create the invoice. This is normally not a large problem except that the market price for stuffing has increased dramatically. Therefore, Cindy has created a debit memo to inform Toys N’ More of the increase in price due to current market conditions.