What is Bank Statement ?
Answers
Definition: A bank statement is a report issued by a bank to its depositor document the account balance and activity during the period.
EXPLAINATION (IF YOU DON'T UNDERSTAND):
When people or companies deposit money into bank accounts, the bank is said to be the depository and the people or company making the deposits are commonly referred to as the depositors. Banks usually issue reports each month for their depositors listing the detailed activity on their bank accounts. These reports are commonly referred to as bank statements.
What Does Bank Statement Mean?
Bank statements usually include the depositor’s name, address, account number, date, and bank name. The bank statement report itself usually lists the following:
The depositor’s beginning balance
Checks, withdrawals, and debits decreasing the balance during the month
Deposits and credits increases the account balance during the month
Photocopies of cancelled checks cleared during the month
The ending balance of the bank account
EXAMPLE (IF YOU STILL DON'T UNDERSTAND):
The purpose of a bank statement is to summarize the transaction activity during the period. Since the bank doesn’t own the money in the account, it must act as a fiduciary and report the balances and transactions to the depositor.
One question that many beginning accounting students have is why is depositing money into a bank account shown on the bank statement as a credit? When a company receives cash from sales, the cash coming into the company is recorded as a debit, so why do bank statements record cash received as a credit? This is good question.
Basically, a bank statement is written from the perspective of the bank. When you deposit money into a bank account, the bank actually owes you money. They owe you the deposit you put in your account. Just like if you were recording a company liability, the bank records a liability to you and lists it as a credit on your monthly bank statement.