LESSON 7-3 UNDERSTANDING THE BANK STATEMENT

Lesson Objectives
 familiarize oneself with a bank statement
 Understand the items debited and credited in a bank statement

A bank statement is a monthly report released by the bank to the account holdeR checking
account. This starts with the balance of the previous month with transaction listed in
chronological order showing the running balance after each transaction to finally arrive at the
ending balance for the month. Transactions listed include deposits, withdrawals, checks paid,
interest earned if any, service charges if any, and all other transactions that transpired during the
month affecting the account. Below is a sample bank statement.
Platinum Bank
Quezon City

Fidas Merchandising Account No. 00345

5 Joy Street, Happy Village, Quezon City August 31, 2017
Date Debits Credits Balance
July 31 P28,000
Aug. 2 P10,000 38,000
Aug. 3 12,000 50,000
Aug. 5 200,000 250,000
P1,000 DM 249,000
Aug. 9 Chk No. 00500 30,000 219,000
Aug. 10 50,000 269,000
Aug. 16 Chk No. 00501 18,000 251,000
Aug. 17 Chk No. 00502 50,000 201,000
Aug. 18 Chk No.00504 35,000 166,000
Aug. 20 125,000 291,000
Aug. 27 Chk No. 00508 8,000 283,000
Aug. 27 Chk No. 00503 40,000 243,000
Aug. 28 Chk No. 33300 10,000 233,000
Aug. 29 150,000 CM 383,000
Aug 30 Chk No. 00505 5,000 378,000
12,000 NSF 366,000
Chk No. 00499 15,000 351,000
Aug. 31 Chk No. 00507 7,000 344,000
Legend: DM - Debit Memo CM - Credit Memo NSF - No Sufficient Fund

Details
1. The beginning balance of P28,000 is the ending balance of last month.
2. Figures under the credit column, unless there is a notation written beside the amount,
represents the deposits made by the account holder to the account.
3. Figures under the debit column, unless there is a notation written beside the amount,
represents the withdrawals or checks drawn against the account. The check number is
written beside the amount after the date.
4. Transactions other than those representing deposits, withdrawals or checks drawn against
the account are with notations beside them. These notations are explained by legends
written after the last transaction in the bank statement so that the account holder will
understand these debits and credits.
5. Debit Memo (DM) are deductions from the balance of the account holder because of
bank service charges made by the bank to the account.
6. Credit Memo (CM) are additions to the balance of the account holder such as proceeds of
loan or interest if there is any.
7. No Sufficient Fund (NSF) is the check deposited by the payee but returned by the bank
because there is no sufficient fund in the payor's account
8. The ending balance, P344,000, is the last figure in the bank statement after all
transactions are entered. This is the balance to be forwarded to the next month's bank
statement. Hence, this will be the beginning balance for September.