What is a Bank Statement?
A bank statement is a report issued by a bank to its depositor document the account balance and activity during the period.
When people or companies deposit money into bank accounts, the bank is said to be the depository and the people or company making the deposits are commonly referred to as the depositors. Banks usually issue reports each month for their depositors listing the detailed activity on their bank accounts. These reports are commonly referred to as bank statements.
What Does a Bank Statement Contain
Bank statements are typically sent out in the post or accessed online (paperless statements). It is important to check your bank statement on a regular basis - especially if you have a high number of transactions. The bank statement shows all deposits made into the bank account and all payments made out, including any direct debits or standing orders. What’s included A bank statement typically provides a full overview of your account over the previous month. It will include:
- The beginning and ending balances of the account
- Deposits in the form of income, cash deposits, etc.
- Withdrawals in the form of cash, cheques, etc.
- Any interest that was made on the account
- Any bank fees or charges for service
- Accounting for bank entries
For depositing entries (money paid into your bank account) the accounting entries you would make would be a debit to your bank account and a credit to the sales ledger or to customer who has paid the money. Likewise, when paying money out of your bank account, the entries made in your accounting system would credit your bank account and debit the supplier who has paid, thus clearing their invoice.
However, if you look at your bank statement you will see that these entries are opposite to the ones you will be processing. This is because, from the bank’s point of view, your business is a creditor. Because a bank treats user transactions as a business, bank customers then see the customer side, making it one of the main reasons it's often difficult to understand debit and credit.