Account statement definition
/What is an Account Statement?
An account statement itemizes the transactions that occurred within an account over a specified period of time. It is typically generated for a calendar month, but can be created for any span of time. There are several variations on the concept. For example, a seller might send a monthly account statement to its customers, on which it itemizes invoices issued and paid, along with the residual account balance. Or, a bank sends its customers a checking account statement, on which is itemized all cash inflows to and outflows from the account, including incidental charges.
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Why are Account Statements Issued?
Account statements serve several purposes. First, they act as a control, since the recipient can compare the transactions listed on the report to its own internal records, and may question any anomalies found. Account statements are also used to collect cash, such as when account statements are sent to customers with outstanding unpaid balances listed. They can also serve as a form of customer service, since the information stated on this form may answer questions that might otherwise have caused the recipient to contact the sender with queries. Finally, they can provide performance information to the recipient, such as when a utility sends an account statement to a customer, noting the amount of energy usage in the past month. A variation on the concept is when a lender sends out an account statement that notes the date on which your loan should be paid off, and the interest expense you will incur - which might incentivize you to pay off the loan earlier.
How to Use an Account Statement
When you receive an account statement, always review it for accuracy. It is possible that the sender made a mistake in its record keeping, which you should bring to their attention. For example, if a lender mistakenly does not record a payment on your mortgage balance, then you will end up with a higher ending mortgage balance than should be the case.
Another good use for an account statement is for your own budgeting. In particular, a checking account statement is useful for tracking the amount you spent in the past month, which you can aggregate by category and then compare to your budget for that period. It is especially useful for tracking anomalies, such as a late payment fee, which can indicate that you are not paying the recipient on time, and so should alter the timing of your payments.
Account Statement Red Flags
From the viewpoint of the recipient, an account statement is extremely useful for detecting instances of fraud. For example, if an unknown payment appears on your checking account statement or credit card statement, there is a good chance that it was fraudulently made by a third party. In these cases, you should notify the sender at once, and may need to shut down the associated account. For example, a credit card statement might contain a line item for sneakers purchased from an online store that you have never heard of. If detected promptly, you may be able to protest these charges and have them reversed. In short, a best practice is to review any account statement as soon as it arrives, to ensure that the information contained within it matches your internal records.
Related Terms
An account statement is also known as a statement of account.