What is an Account Statement?

What is an Account Statement?

A statement of accounts is a document that reflects all transactions that took place between you and a particular customer for a given period of time. Generally business owners send statements of accounts to their customers to let them know how much they owe for sales that took place on credit during that period.

An account statement is a periodic summary of account activity with a beginning date and an ending date. The most commonly known are checking account statements, usually provided monthly, and brokerage account statements, which are provided monthly or quarterly. Monthly credit card bills are also considered account statements.

An account statement is a periodic statement summarizing account activity over a set period of time.

Account statements can be thought of as a summary of the account and include statements of services provided, fees charged, and money owed.

Account statements should be scrutinized for accuracy, and historical statements are critical for budgeting.

Understanding Account Statements

Account statements are generated for any type of account with ongoing transactions. For example, credit card holders use their credit cards to make transactions at a point of sale, and the transactions are reflected as they occur.

When the credit card holders pay the credit card debts, the funds are reflected in the account. At the end of the period, the credit company sends credit card bills that show all transactions conducted using the credit card, fees charged, and the current credit card balance that represents debts.

Similarly, online payment processors such as PayPal allow customers to access credit card statements for any specific duration that the customer is interested in. Any cash payments in and out of the account are shown in the statement, and the ending balance shows the current account balance at the end of the period.

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Service providers also send a periodic account statement to their customers, showing the level of consumption, unpaid credits, prepayments, and the amount due for the period. Examples of utility companies include cable TV service, telephone and internet subscription providers, water providers, and power companies.

The companies above generally bill their customers at the end of every month, and they send an account statement detailing all transactions in the customer’s account. The statement shows debits paid to the account, credits received, account maintenance fees, state taxes, and any surcharges included in the account.

Some utility companies charge a fixed fee, which is incurred regardless of whether or not the customer consumes the service or product provided.

How Account Statements Are Used

Account statements should be scrutinized for accuracy, and historical statements are critical for budgeting. A credit or loan account statement, for example, may show not only the outstanding balance due but the interest rate charged on that debt and any fees that have been added during the payment cycle.

This can include late charges for payments not received by their due date as well as overdraft fees when bank account holders overspend. Your account statements are a window into your finances.

The statement may also list financial information that relates to the account holder such as their credit score, or the estimated time it will take to completely pay off a debt via installment payments.

Alerts and notices to the account holder may also appear on these statements, calling attention to matters with the account that need to be addressed, such unusual charges that should be reviewed and verified.

Components of an Account Statement

An account statement should provide financial information that gives an accurate overview of the customer’s transaction history during the billing cycle. The upper section of the account statement shows the name, address, phone number, and email address of both the business and the customer. The other components include:

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Date range: The time interval covered by the statement. Generally, the statement can cover a specific month, quarter, or year.

Opening balance: The starting amount in the account statement and shows the amounts due for the previous period.

Invoiced amount: The total amount of goods or services that the customer consumed during the current period.

Amount paid: The total amount that the customer has already paid and deducted from the amount invoiced in the current period.

Balance due: The amount that the customer is required to pay to the company in the current period. It can be positive (customer owes the vendor money), negative (vendor owes the customer), or zero (all payments have been settled).

Red Flags on Account Statements

Anomalous items on an account statement may be a sign the account has been compromised, perhaps through a stolen credit or debit card or through identity thieves who gained access to account information. For example, an account holder or the financial institution might spot a charge for concert tickets or a luxury item that seems out of the ordinary.

 Account-holders may be able to dispute such out-of-place charges and file a claim that they did not make the purchase themselves. Reviewing your account statements as they come in is a good financial habit that can catch these red flags before they become a financial disaster.

Why the Account Statement is Important

An account statement is sent to customers to provide a summary of products and services consumed and billed for a given period. Any amount paid to the account during the period is shown on the statement, as well as any amount that remains unpaid for the billed period, and the billing cycles preceding the current cycle.

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The customer also uses the account statement to dispute any transaction that needs to be addressed by the service provider or financial institution.

For example, the amount owed may include additional costs such as penalties for delayed payments, interest charged on the debt owed, overdraft fees, double charges, etc. The additional costs increase the total amount owed, and the customer may require these costs to be reviewed to reduce the debt burden.

The account statement is also important when checking the consistency of records in a customer’s account. The business can use it to verify that a customer’s already paid all the amounts owed to the business, and if there are any missed payments, the business owner can send a payment reminder to the customer.

If there are double charges or double payments captured in the system, the business owner can review and verify all payments to ensure the accuracy of recorded transactions.

For recurring customers who receive an invoice periodically, the account statement makes it easier to view all invoices sent to the customer and payments received from the customer. Any discrepancies are easily detected and rectified.

What is bill statement?

A billing statement is a monthly credit card bill that summarizes activity on your account over the preceding month. The bill itemizes all purchases as well as payments received. It shows the current balance on the account and the date by when the account must be paid to avoid finance charges.