Every business engages in buying and selling. As a result, they are constantly receiving bills or sending bills. Sometimes, these bills may need adjustment, which is done through memos.
What is a debit memo?
A debit memo is a document used to adjust accounting records, particularly when a business sends back goods with a complaint to the supplier. The memo is sent to the seller so that the seller can reduce the amount payable on the invoice. This document is commonly used to adjust accounts and is an official way to reduce outstanding accounts between two entities.
It is considered an official document and is added to the accounting records so that every change in balance is officially recorded. This could be done verbally as well. However, verbal communication could be forgotten or manipulated and would have no proof, thus giving way to illegal activities, accounts dressing and fraud.
Having a debit memo in the records ensures no unreported accounts arise at the time of the audit.
File: Excel (.xlsx) and iPad
Size 18 KB
A debit memo may also be used to reduce the balance of a bank’s customer. This reduction in the customer’s account may be due to several reasons, including:
- Transfer of funds from one bank account to another bank
- Interest charged by the bank
- Repayment of the loan
- Annual fees charged by the bank
- Any other fee that may have been charged (such as for printing chequebooks or other services)
Debit memo in accounts payable
Another use of debit memos is in adjusting accounts payable. When the goods are returned to the supplier because they were faulty or damaged, a debit memo is also sent to the supplier to adjust the amount on the invoice. Thus, the accounts payable balance is reduced through such a debit memo.
The difference between a debit memo and an invoice
A debit memo is different from an invoice. An invoice is a receipt the seller sends to the buyer when the buyer makes a purchase. An invoice is a document showing the total amount payable by the buyer. When the buyer receives the goods, they may be checked for damage or working conditions.
If the buyer has any complaints regarding the goods, they will return the damaged goods and a debit memo so the supplier can adjust the invoice. Debit memos must include the reason for the memo and the date and amount for which accounts payable must be adjusted.
A debit memo and a credit memo
Usually, the buyer sends a debit memo when they are over-billed or there is a deduction from the buyer’s account. Similarly, a credit memo is sent to the buyer when they are underbilled.
A credit memo is sent to the buyer if there has been a mistake in the invoice calculation (invoice amount exceeds the actual amount) or if the seller forgot to add any applicable discounts. Similarly, banks send credit memos to customers when the customers have earned interest on their deposits. The debit and credit memo amounts must be adjusted in the accounts and maintained in filed records.
We have many debit memo templates available for free download on our webpage. You can download them, add your information, and print or send them electronically.
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File: Excel (.xlsx) and iPad
Size 18 KB
File: Excel (.xlsx) and iPad
Size 23 KB
Debit Note Letter to supplier
Hi Paul,
I hope you’re having a great autumn.
As the weather is changing, businesses seem to be running busy. I want to confirm that your order has been processed and is ready to be dispatched. However, our credit controller notified us that you have not paid for the previous invoices yet.
Per our policy, we are not allowed to dispatch orders if we have overdue invoices. Therefore, I request that you pay the overdue invoices. I have attached the debit note to this letter, which contains details regarding our bank account and credit policies.
Please let me know if anything.
With thanks
Miko
Debit Note Covering Letter
Dear Abby,
I hope you’re doing great.
Yesterday, we received your email. My assistant also notified me that we have been receiving calls from your company for chasing the overdue payment. I have been hunting for the paperwork to confirm this overdue invoice. I was waiting for confirmation from our warehouse supervisor, who confirmed that we never received these goods.
We had requested to raise a return against these goods, but we never heard back with a return form. These calls and emails are just causing us frustration. It would be great if you could issue us a credit note and write off this overdue invoice.
With thanks
William
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