Current Account Statements: Definition, Uses & Examples

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04 APRIL, 2024

A Current Account statement summarises all transactions within a specified period, typically a month or quarter. It provides details of invoices issued, payments received, and associated fees. This statement is essential to track the activities. Whether it's a bank account, credit card, or brokerage account, regular review of the Current Account statement ensures accurate record-keeping and helps businesses make better financial decisions.

What is an Account Statement?

An account statement is crucial to summarising essential information like services provided, associated fees, outstanding balances, and prepayments. It details billings and customer payments, reflecting an ending balance, positive or negative. Typically sent via mail or electronically, it serves as a reminder for unpaid credits. Customers can request bank statements for their Current Accounts through physical mail, email, or the service provider's portal. This document is pivotal for service providers and customers, facilitating transparency in financial transactions and ensuring a clear overview of account activities.

Components of Current Account Statements

Components of a Current Account statement provide a comprehensive overview of financial data and transaction history during a specific billing cycle. Key elements include:

Date Range: Specifies the time interval covered by the statement, such as months or days.

Opening Balance: The initial amount in the account before any transactions occur.

Amount Paid: Total money paid to a customer, business, or individual during the billing cycle.

Types of Account Statements

These account statements serve different purposes beyond compliance. Each statement serves a specific purpose in evaluating and showcasing various financial aspects of a business. Here are a few important ones you must be aware of:

Income Statement

The income statement, also known as the profit and loss statement, tracks a business's revenue, losses, and expenses over a set period. It provides a comprehensive overview of whether a company has achieved profitability or incurred losses during that time.

Cash Flow Statement

The cash flow statement shows how money enters and exits a business, focusing on cash transactions and working capital.

Balance Sheet

The balance sheet is an all-inclusive document highlighting a business's assets, liabilities, and equity. It displays the business's current value, aiding in assessing its ability to meet financial obligations.

Note to Financial Statements

A note to financial statements is a requirement under IFRS that adds context and explains listed assets to ensure compliance.

Statement of Change in Equity

This statement illustrates changes in a company's share capital, retained earnings, and accumulated reserves. For sole proprietors or partnerships, it reflects changes in owner's equity. In corporations, it shows how equity shares have changed among shareholders.

Bank Statements

Bank statements are essential records of financial transactions within a specific bank account. They offer a month-by-month summary of deposits and withdrawals, facilitating accurate tracking of financial activities.

How Account Statements are Used

Account statements provide a glimpse into an organisation's financial health, creditworthiness, and financial activities. Here are some unique applications of account statements:

They facilitate data-driven decisions for investments, loan approvals, and business strategies.
Aids in evaluating the financial risks associated with lending or investing in a particular entity.
Enables predictions about market trends and the potential impact on a company's financial performance.
Assists in crafting and refining budgets by analysing income, expenses, and overall financial standing.
Builds investor confidence by transparently presenting a company's financial position and performance.
Ensures adherence to financial regulations and compliance by providing a detailed record of financial transactions.
Informs strategic planning by offering insights into revenue patterns, expense trends, and overall financial stability.

How an Account Statement Works

An account statement functions as a record of financial transactions. Each action is documented on your statement when you conduct activities like withdrawing cash, using your credit card, or making loan payments. The statement details the date, type, and amount of each transaction.

For instance, consider a month of transactions in an account:

Jan 1: Deposited Rs. 15,000
Jan 7: Paid Rs. 10,000 for rent
Jan 12: Paid Rs. 1000 credit card bill
Jan. 15: Transferred Rs. 2000 to savings

Your account statement displays these activities and the ongoing balance after each transaction, providing a clear overview of your financial interactions.