What Are Bank Statements and How They Work

Bank statements are a record of all transactions made on your bank account, including deposits, withdrawals, and transfers. They provide a clear picture of your account activity over a specific period.

A bank statement typically includes your account balance, transaction history, and any fees or charges incurred. This information helps you track your spending and stay on top of your finances.

Your bank statement will usually be mailed or emailed to you on a regular basis, such as monthly or quarterly, depending on your account settings. You can also access your statement online through your bank's website or mobile app.

It's essential to review your bank statement regularly to ensure everything is accurate and to catch any suspicious activity.

A bank statement is a vital document that provides a snapshot of your account activity over a specific period. It's essential to understand what's included in a bank statement to stay on top of your finances.

At the top of your bank statement, you'll typically find your account details, including the date period, sort code, and account number.

Your name and address will also be displayed, along with your SWIFT, BIC, and IBAN number.

A bank statement will also show you your start and ending balance, giving you a clear picture of your account's overall health.

You'll find a list of all your transactions within the stated period, including the date each one was processed and details on the individual transactions.

Here's a breakdown of the key information you can expect to see on your bank statement:

Your bank statement will also show any interest added to your account and notify you of any overdraft limit or charges or fees incurred.

Bank statements can be overwhelming, especially with all the abbreviations scattered throughout. You might see abbreviations like TRF, which stands for Transfer, indicating a transaction where money was moved from one account to another.

As you review your bank statement, you might notice a withdrawal from a cash machine, marked as CDM. This means you withdrew cash from an ATM or cash machine.

Understanding these abbreviations can help you make sense of your bank statement. A BACS transfer is a type of bank-to-bank transfer, and you might see this abbreviation if you've made a transfer between accounts.

Some abbreviations indicate payments or charges. For example, a CHG is a charge, which means you've been charged a fee for a service. A BP, or bill payment, indicates that you've paid a bill.

You might also see abbreviations that indicate errors or corrections. A COR, or correction of a transaction error, means that a mistake was fixed on your account. A DR, or account overdrawn or debit balance, indicates that you owe money to the bank.

Here's a quick reference guide to help you understand common bank statement abbreviations:

A bank statement is essential for reviewing your account's activities and detecting any discrepancies. It helps you track expenses and spot trends that may have gone unnoticed.

You can use a bank statement to monitor your spending and identify areas where you can cut back on unnecessary expenses. This can be especially helpful for budgeting purposes.

Regularly verifying your bank account can help reduce overdraft fees, errors, and fraud. Discrepancies must be reported to the bank promptly, and you may have as little as 30 days to dispute errors.

A bank statement is primarily used to review your account's activities during a certain period.

This helps detect potential issues like fraud and accounting errors, and refreshes your memory of the period's activities.

A bank statement is also used for account reconciliation, which involves comparing your statement with another record of financial activities to highlight any discrepancies.

Tracking expenses is another common use of bank statements, as they lay out your account's overall activities, allowing you to monitor your spending and spot trends that may have gone unnoticed.

This can be particularly helpful for budgeting purposes and finding ways to save money.

Having a bank statement can help you keep track of your spending and stay on top of your finances.

A bank statement shows you every transaction you've made, so you can see exactly where your money is going.

This can be especially helpful if you're trying to cut back on unnecessary expenses or make a budget.

You can use a bank statement to identify areas where you can save money and make adjustments accordingly.

Regularly reviewing your bank statement can also help you detect any errors or suspicious activity on your account.

This can be a big relief, especially if you're worried about identity theft or account hacking.

A bank statement can also serve as a record of your income and expenses, which can be useful for tax purposes.

This can come in handy during tax season, especially if you're self-employed or have a side hustle.

Having a bank statement can also give you peace of mind, knowing that your financial records are up to date and accurate.

A bank statement may seem simple, but it's packed with information. The statement period, which is the time frame covered, can vary by financial institution, but it's usually a month long. This is the time frame covered within your statement.

Your bank statement will include your starting and ending account balances, which let you quickly gauge where your money is trending. Some banks and credit unions may also include average daily balances. All completed transactions for the time period are also shown, typically in chronological order, with each line item showing transaction date, amount, and payee.

To reconcile your bank statement, you'll need your current and previous month's statements, as well as your company ledger. The bank reconciliation process involves comparing the balance in your accounting records with your bank account balance, and identifying any discrepancies. A simple spreadsheet or online template can help guide you through the process.

Here's a breakdown of the steps to reconcile your bank statement:

By following these steps and regularly reconciling your bank statement, you can ensure that your financial records are accurate and up-to-date.

So, you're trying to figure out how to read a bank statement. It's actually quite straightforward once you know what to look for. The statement period, which is the time frame covered within your statement, is usually a month long, from the first to the last of the month.

You'll also see your starting and ending account balances, which will give you a quick idea of where your money is trending. Some banks and credit unions may include average daily balances as well.

Each transaction is listed in chronological order, showing the transaction date, exact amount, and the name of the payee. Your bank statement may not include pending transactions, so keep that in mind.

Fees and any interest earned are also usually included on the statement. If you have an interest-bearing account, you'll see the interest earned over the statement period.

The statement will also clearly indicate the issuing bank, account number, and possibly personal information like phone number and mailing address.

Here are the common elements you can expect to find on a bank statement:

To start the reconciliation process, you'll need your bank statements for the current and previous months, as well as your company ledger. Gather a copy of the bank statement for the period and your accounting system or company ledger list of all payments, deposits, and cash account balances from the accounting system.

Begin with your closing balance for the prior month - that will be your starting number. Examine each bank statement item leaving the bank account, such as checks, transfers, and bank fees. Each statement item should be on your ledger or system list, and ensure that your deposits and cleared checks match the amounts the bank recorded.

If you find a discrepancy, record the missing or incorrect item. Review bank transaction items on the statement that add to the account, such as interest, deposits, transfers, and bank adjustments. Each positive transaction should also be reflected in your ledger or accounting system, and if not, record the missing item.

Here's a step-by-step guide to the reconciliation process:

At the end of your bank reconciliation statement process, the accounting record's balance (after making adjustments) should equal the bank statement balance. If there are further discrepancies, investigate what might have been missed in your recording or errors that may have been made at the bank.