What is a statement of accounts?

A statement of accounts is a document that reflects all transactions that took place

between you and a particular customer for a given period of time. Generally business

owners send statements of accounts to their customers to let them know how much

they owe for sales that took place on credit during that period. The guide walks you

through the contents of statement of accounts and shows how to file this document for

customers.

Importance of statements of accounts

A statement of accounts is a great way to provide your customers with a recap of the

products and services that were billed to them.  statement also helps the business

owners confirm the payments that the customer has already made for a statement

period, which is generally a month.

The statement comes in handy when you have recurring customers for whom you

have to create invoices on a monthly, quarterly, or annual basis. Statement of account

is usually in addition to the individual invoices sent to the customer for each and

every purchase that he makes. Since the payments are automatically generated on a

periodic basis, it is easier to view all invoices sent and payments received in the same

place for one particular customer. It can also be used as a tool for payment reminders
as it gives the business owner an idea about the customer’s recurring expenses. In that

case, the business owner can send reminder for payments in advance.

Whenever a business faces inconsistency in records, the summary report of the

statement enables a business owner to check if the customer has paid his dues. This

way they can detect the inconsistency in data. The statement can also help the

business owner check whether the declared amount due includes the payments made

by the customer so far. It can even help catch transactions that have accidentally been

run twice.

The statement of accounts also provides business owners an accurate price record for

each item that they sold to their customers. This enables them to track information

associated to a customer (like the purchases made by the customer) for any time span

and aids in identifying errors.

Statement of accounts – sample format

A statement of accounts is typically divided into two halves. The top half contains an

overview of the customer’s accounts. The bottom half contains the details of each

transaction.
Account overview
The top half of the statement shows the name and address of both the business owner

and the customer.

It also contains the time interval for which the statement has been prepared. Some

businesses use the last day of each month as a closing date. In that case, the statement

will show invoices and credit notes for the month. However, there is no strict rule

on what dates to use for the statements.

This part also includes the account summary, which contains the opening balance,

invoiced amount, amount paid, and balance due.

The opening balance is the ‘total due’ amount from the statement which was sent out

for the previous period. The period can be any time interval, whether it’s monthly,

quarterly, or yearly.

The invoiced amount is the money that your customer is expected to pay for the

goods or services that they received from your business during the current period.

The amount paid is the money which the customer has already paid. This is deducted

from the total invoiced amount to get the current amount due.

The balance due is the money that the customer has yet to pay you.
Invoice details
 Date: This is the date on which the invoice or credit note was sent.

 Details: The numbers which refer to the invoice or credit note that were sent

out in the given period. Even payments can be allocated to reference numbers

which are mentioned in the cash register.

 Transactions: It describes the type of transaction affecting the customer.

 Amount: The currency amount of the sales invoice or credit note sent to the

customer. Credit notes are usually represented as a negative value because they

reduce the customer’s outstanding balance.

 Payment: This column shows the payments the customer has already made

during the month.

 Balance due: A running tally of the amount the customer currently owes you.

Other sections
The format for a statement of accounts varies from business to business. Here

are some other fields that may be included:

Remittance: Remittance is the amount of money the customer sends to the seller as a

payment for the purchase made. Including the seller’s business name and address on a

remittance coupon makes it easy for the customer to put it in an envelope and post it

to the seller. The seller can also fill the customer’s details on the right side so that

they will know which customer has sent the remittance.

Customer cut-off dates: Many sellers have a cut-off date for each month beyond

which any invoices and credits will be counted as part of the next consecutive month.

Ideally, all invoices and credit notes should be added and the statement of

accounts should be sent to the customer before the cut-off date.