Definition: A report a bank sends to each customer showing the activity (ie: additions and subtractions) on his or her account which took place over a period of time, usually one month. It also shows the amount of money in the account at the beginning of the statement period, how the activity added to and subtracted from this figure, as well as the balance at the end of the period.
Example: ABC Bank sends a statement to customer Jane Chu which covers the month of January. The report shows that entering January, she had $500 in her account. She wrote one check for $100 and another check for $50, bringing her balance down to $350 ($500 – $100 – $50). She also made a deposit of $75. The statement shows her ending balance to be $425 ($350 + $75).
Investeach explains: Bank account holders should always open and analyze their bank statements to ensure that no mistakes have been made by the bank. In addition, the bank may have made additions and subtractions that the account holder is not aware of. For example, it may have taken money from Jane’s account to pay for a new set of checks Jane ordered as well as deposited interest that she earned on her money. These need to be recorded in the separate checkbook register that Jane maintains so that it stays accurate.
More often than not, what the bank reports to be in the account at the end of the period is not what the person’s checkbook register shows to be in the account. This doesn’t mean that either party is wrong. It just means that there are things the bank knows about the account that the account holder doesn’t and vice versa. See Account reconciliation for how to bring the different balances together.
With the advent of on-line banking, account holders no longer have to wait until their statements arrive each month to see what’s happening with their accounts. They can log on any time or even sign up to automatically receive notices when there is account activity!
Riddle me this:
1. What is the usual length of time covered by a bank statement?
2. What are two reasons why an account holder should examine the bank statement closely?
3. What are two types of activity a statement may contain which the account holder would be unaware of?
4. What can an account holder do between statements to keep close track of his or her bank account?
5. What should a person maintain independently of the bank to track the activity and changing balance in the account?