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Credit Memo Vs Debit Memo | How Credit Memo & Debit Memo Works?

Credit Memo Vs Debit Memo

Credit Memo Vs Debit Memo | How Credit Memo & Debit Memo Works?: Hey guys, today I am sharing some useful information about credit and debit memo. May this information helps you.

Credit Memo Vs Debit Memo | How Credit Memo & Debit Memo Works?

Credit Memo Vs Debit Memo

Debit Memo

A debit memo is a record of a sum that has been taken from a customer’s bank account. Alternatively, a check is written and deposited into bank accounts to have the same effect as if it had been physically deposited into the accounts.

Bank charges from account holders, bank charges for deposited amounts, loan payments and interest, dishonoured cheques, transferred cheques from other bank accounts, and other service charges are all examples of these types of charges.

The account holder balance is a liability in a bank’s books, according to terminology used in the industry.

That is why banks deduct such fees from account holders to cover their costs. Your account balance is a liability to the bank if you think about it this way.

When you made a deposit, it increased your bank account’s assets as well as the bank’s liabilities. But when a customer uses their checking or savings account to make a withdrawal.

The balance in their account is deplete, and this reduces their liability to the bank.

Credit Memo

When a depositor withdraws money from his bank accounts using a check for a specific transaction, it is refer to as a credit memo.

Other types include memos issued by sellers in order to reduce the amount of money owe by customers from sales invoices that have already issue.


XYZ Corporation sent XYZ Buyer Corporation an invoice for $ 1000 worth of goods, but XYZ Buyer Corporation discover that one of the goods is damage in transit, so the seller issue a credit memo for $10. The following accounts include a credit memo for XYZ seller Corp.:

Sales retunes and Allowances of $10 is debit from the account

A $10 credit from Accounts receivable has grant.

The credit memo reduces the seller’s net profit and accounts receivable in this transaction. A credit memo is record in accounts when the company XYZ buyer corporation records the following information:

  • Allowances and returns are cover by a $10 credit.
  • An amount of $10 has deduct from Accounts Payable.
  • When it comes to bank fees and other charges to depositors, a debit memo is what you have use.
  • The credit memo, on the other hand, pertains to sellers who are liable for receivables, payables, returns, and allowances on their accounts.

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