Question

A bank issues a debit memorandum to notify a depositor of:

a. a deduction to a depositor’s account
b. a deposit to the depositor’s account
c. a withdrawal through an ATM
d. a check that was deposited in the account but was returned NSF
e. periodic payments arranged in advance, by a depositor

Answer 1

A debit memorandum from a bank notifies a depositor of a deduction to their account, which may include service charges or penalties, and reflects the bank's adjustment of its liabilities.

Step-by-step explanation:

A bank issues a debit memorandum to notify a depositor of a deduction to a depositor’s account. This could be for several reasons, such as a service charge or a penalty for not maintaining a minimum balance. When bank customers deposit money into a checking account, savings account, or a certificate of deposit, the bank views these deposits as liabilities. These types of accounts are known as a demand deposit or checkable deposit in banks that is available by making a cash withdrawal or writing a check. Banks operate as a depository institution that accepts these money deposits and then uses them to make loans. Therefore, when a bank issues a debit memorandum, it is deducting from these liabilities that it owes to its customers, decreasing their balance accordingly.