A vendor may issue a debit memo to a customer if he undercharged the customer. Further, if the customer received defective goods, he may return the damaged merchandise to the vendor along with a debit memo.
Once it has been determined that the customer has been undercharged, perhaps because of a pricing or sales tax error, the vendor issues a debit memo. When the customer issues a debit memo to the vendor because of damaged goods received, his "Accounts Payable" to the vendor decreases.
The debit memo should explain the circumstances under which it is being issued. If the client was insufficiently charged, the body of the memo should detail precisely what is owed and why. If the debit memo is for returned goods, it should list the affected items. The debit memo should also identify the original sales invoice number and the shipment terms.
You can create a debit memo using Microsoft Word. It should include a header, a body and a footer.
You can use pre-printed debit memo forms, which include consecutive numbering and a space for you to enter your company information. You also can purchase customized debit forms from stationery shops.
Some companies use financial software (for example, Quickbooks) with a feature that allows you to generate a debit memo.