Course Outline
Join PRO

What does debit memo mean on a bank statement?

Author:
Harold Averkamp, CPA, MBA

Definition of Bank Debit Memo

A debit memo on a company’s bank statement refers to a deduction by the bank from the company’s bank account. In other words, a bank debit memo reduces the bank account balance similar to a check drawn on the bank account.

Examples of a Bank Debit Memo

Some examples of a bank debit memo include the following withdrawals from a company’s checking account:

  • The company’s monthly loan payment
  • The fee for printing the company’s checks
  • The fee for handling a check that the company deposited and the check was returned because of insufficient funds
  • A transfer of funds to another account at the bank

The bank’s use of the term debit memo is logical because the company’s bank account is a liability in the bank’s general ledger. (The bank accepted the company’s cash which is recorded by a debit to the bank’s Cash account, and the bank credits its liability account Customer Deposit Accounts. The liability is appropriate since the bank has the obligation to return the customer’s money on demand). The bank’s liability is reduced when the bank charges the company’s account for a bank fee. Hence, the credit balance in the bank’s liability account is reduced by a debit.

In the company’s general ledger, the bank debit memo will reduce the company’s checking account (which is an asset) and will require the company to credit its Cash account (and debit another account such as Bank Fees Expense).

Join PRO to Track Progress

Features

Free

PRO

Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Dictionary
Bookkeeping Video Training
Financial Statements Video Training
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Flashcards
Crossword Puzzles
Word Scrambles with Coaching
Bookkeeping Study Guide
Managerial and Cost Accounting Study Guide
Certificates of Achievement
Bookkeeping Certificate of Excellence
Business Forms
Printable PDF Files
Progress Tracking
Motivational Badges and Points
Motivational Medal Rankings
Motivational Activity Streaks
Public Profile Page of Achievements

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 3,033 Testimonials

PRO for Teams
  • Easily onboard new users and team admins
  • Monitor individual user progress and grades
  • Monitor team progress and compare users
  • View average grades and find problem areas
  • Monitor recent activity and user achievements
PRO for Teams
Take the Tour Join Pro Upgrade to Pro