An account statement is a periodic report that is sent to a customer. It contains a summary of account activity within a defined period – usually a month, quarter, year, or other custom periods. Examples of account statements may include credit card statements, brokerage account statements, and checking account statements.
An account statement is a summary of account activity over the current period which can be a month, quarter, year, or other defined period.
The account statement shows a summary of invoices sent, payments received, and other fees associated with maintaining the account.
An account statement can be generated for any type of account with ongoing transactions such as a brokerage account, insurance account, credit card, or bank account.
An account statement provides important information such as a list of services provided to the customer, fees charged for the service provided, money owed by the customer, and any prepayments to the account.
It can also show billings to the customer and payments made by the customer, resulting in an ending balance that can be positive or negative. Companies may send the account statement to a customer to remind them of credits that are still unpaid for the services rendered.
The account statement is sent as a printed document to the customer’s physical address, or electronically to the customer’s email address. Customers may also log into the service provider’s portal and download an account statement for the period.
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.
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.
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:
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).
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.
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.
Take your learning and productivity to the next level with our Premium Templates.
Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI's full course catalog and accredited Certification Programs.
Already have a Self-Study or Full-Immersion membership? Log in
Access Exclusive Templates
Gain unlimited access to more than 250 productivity Templates, CFI's full course catalog and accredited Certification Programs, hundreds of resources, expert reviews and support, the chance to work with real-world finance and research tools, and more.