What is a statement of account

what is a statement of account

What is a statement of account?

A statement of account is a detailed report of the contents of an account. An example is a statement sent to a customer, showing billings to and payments from the customer during a specific time period, resulting in an ending balance.

The purpose of the statement is to remind a customer of sales on credit that have not yet been paid to the supplier. The statement is usually a printed document, but may also be sent electronically.

A sample statement of account usually includes the following information:

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

    being paid.

There may also be a block on the statement, in which is noted the contact information for the supplier's collections staff, in case the recipient wants to contact them to discuss the information on the statement.

The amount of invoices listed on the statement may also be itemized in time buckets, so that the reader can easily determine which invoices are overdue for payment, and which are not yet due. The time buckets typically used are:

  • 0 to 30 days
  • 31-60 days
  • 61-90 days
  • 90+ days

In rare cases, the presence of large credits on a statement of account may reveal that the supplier owes money to the customer, in which case a payment or ongoing credit is arranged.

The utility of the statement of account is questionable, since it requires some accounting staff time to create, as well as postage costs, and may be ignored by recipients. It is also generally issued immediately after month-end, when it interferes with the monthly closing process. It is most cost-effective in those situations where there is a history of achieving collections that are directly attributable to the issuance of statements of account.

Similar Terms

A statement of account is also known as an account statement .

Related Topics

Source: www.accountingtools.com

Category: Forex

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