What effect does a debit memo in a bank statement have on the Cash account? What effect does a credit memo in a bank statement have on the Cash account?
Ms. Sue
A debit memo in a bank statement indicates that the bank has deducted money from your account. This could be due to service charges, NSF (non-sufficient funds) fees, or any other deductions made by the bank. When a debit memo is recorded, it reduces the balance of your Cash account.
To determine the effect of a debit memo on the Cash account, you need to know the starting balance of the Cash account from the previous period, any deposits made during the current period, any checks written or withdrawals made, and any debit memos from the bank statement. By subtracting the total of withdrawals and debit memos, and adding the total of deposits, you can calculate the ending balance of the Cash account after the impact of the debit memo.
On the other hand, a credit memo in a bank statement indicates that the bank has added funds to your account. This could be due to interest earned, a refund, or any other deposits made by the bank. When a credit memo is recorded, it increases the balance of your Cash account.
To determine the effect of a credit memo on the Cash account, you again need to know the starting balance of the Cash account from the previous period, any deposits made during the current period, any checks written or withdrawals made, and any credit memos from the bank statement. By adding the total of deposits and credit memos, and subtracting the total of withdrawals, you can calculate the ending balance of the Cash account after the impact of the credit memo.