Meaning of Debit Memo on a Bank Statement
The deduction from the bank account’s balance is termed as a debit memo on a bank statement. So, a debit memo produces the same effect as a check written on a bank account.
A bank debit memo could be for anything; it could be a fee for interest owed to the bank, a payment in terms of a loan taken, a fee owed to the bank for the printing of checks, a fee for the handling of a check that was bounced owing to insufficient balance, fee for intra-bank account transfers etc.
The fee, decrease or reduction is called a debit memo since the checking account balance is deemed as a liability on the bank’s books. This is so because the bank has its customer’s money as one of its assets and the customer’s account serves as one of the bank’s liabilities. When a customer’s account balance is decreased by a bank, it is actually reducing or decreasing its liability. Every debit entry results in the reduction of liabilities on the bank towards its customers. That is exactly why the bank credits a customer’s account when the account balance is increased.