What Is an Account Statement?

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.

The purpose of the statement is to remind a customer of sales on credit that have not yet been paid to the seller. The statement is usually a printed document, but may also be sent electronically. A sample statement of account usually includes the following information:

• The beginning total of unpaid invoices.
• The invoice number, invoice date, and total amount of each invoice issued to the customer during the time period.
• The credit number, credit date, and total amount of each miscellaneous credit issued to the customer during the time period.
• The payment date and total amount of each payment received by the seller during the time period.
• The net remaining balance of all transactions listed. This is the total amount payable to the seller.
• A payment slip on the bottom of the page that can be torn off and used as a remittance back to the seller. The slip usually contains a mail-to address, the customer name, and a block in which to fill in the amount being paid.

Understanding Account Statements

Account statements refer to almost any official summary of an account, wherever the account is held. Insurance companies may provide account statements summarizing paid-in cash values, for example. Statements can be generated for almost any type of accounts that represent ongoing transactions where funds are repeatedly exchanged. This can include online payment accounts such as PayPal, credit card accounts, brokerage accounts, and savings accounts.

Utility companies, as well as telephone and subscription television service providers, usually generate account statements for their customers detailing their usage and any overages during the payment cycle. Such statements typically list debits paid, incoming funds or credits received by the account holder, and fees associated with maintaining the account. For example, certain types of savings accounts might incur regular maintenance fees unless a certain minimum balance of funds is maintained in the account. Cable television subscriptions may include state taxes and other surcharges that are included in providing regular service.

Is a Statement of Account an Invoice?

A statement of account is not an invoice. It is a report issued by a vendor and sent to a client, typically in a PDF format delivered through email.

A statement of account captures the financial transactions between the two companies during a specific period of time, usually a one month period. The statement lists out all the invoice amounts and payments. It would also include refunds from the vendor too. The statement of account may show an amount still owing by the client.

An invoice is a different document. It is also issued by the vendor, but it is a bill for one transaction only.

Every invoice for the time period being documented, regardless of whether it has been paid or not, is listed as a line item in the statement of account. The corresponding payments will also be there. In this way, both vendor and client can see if a payment is missing or if the client’s account is up to date.

Here are the differences between what you will see on an invoice and a statement of account. An invoice:

• Describes the items purchased (or services provided) and cost per unit.
• Adds taxes.
• Displays the total amount owing.
• Provides payment terms and payment details.

A statement of account:

• Lists all previous invoice amounts, with invoice numbers and dates, as individual line items.
• Lists all payments or credits as individual line items.
• Displays an outstanding balance, if any, from all transactions.
• It may list cost buckets (more on that below).

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.

Why Is Statement of Account Important?

A statement of account acts as a tool for vendors to remind clients that their accounts are not yet fully paid up. This is important because the resulting client payments increase a vendor’s cash flow, and allow management to spend the money on the resources they need to keep the business going.

The statement of account is also important for a client, because it allows them to track their spending. Also, the statement could help them save money; if an amount is owed, they can pay it now and perhaps avoid a late fee.

For more tips on how to speed up payments to your company, read “What Are Trade Receivables”.

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.