How should I interpret a bank debit memo when recording the company's journal entry?
I keep mixing up debit and credit when the bank statement labels a fee as a debit memo.
Read the bank memo from the company's perspective before choosing the entry. A bank debit memo usually means the bank reduced the customer's deposit balance. For the company, that means cash decreased.
If North Pier Studio sees a 45 bank debit memo for service fees, the company's entry is:
| Account | Debit | Credit |
|---|---|---|
| Bank fee expense | 45 | |
| Cash | 45 |
The bank's label is not the company's debit or credit instruction. It tells you what the bank did to the deposit balance.
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