Business bank account holders receive regular statements of account from the bank, perhaps every month or even every week. With computerised banking systems, it is now possible to request and download a bank statement without the need for it to be requested and delivered using the postal service.
A bank statement shows all the payments and receipts processed through the account by the bank since the previous bank statement.
FA1: RECORDING FINANCIAL TRANSACTIONS
A bank statement may look something like this:
SouthEast Bank pic
High Street, Borchester BO1 2ER
Account Name: ABC Co
Account number 22353712
| Paid out | Paid in | Balance $ |
|---|---|---|
| 2 July | Balance b/f | 345.00 |
| 3 July | Cheque 23457 | 100.00 |
| 245.00 | ||
| 5 July | Cheque 23454 | 278.00 |
| 33.00 o/d | ||
| 6 July | BGC T J Smith | 425.00 |
| 392.00 | ||
| 9 July | DD Cheshire Gas | 45.00 |
| 9 July | Bank charges | 56.00 |
| 291.00 | ||
| 10 July | BAC Fullaway Limited | 230.00 |
| 521.00 | ||
| 11 July | SO BV Properties | 400.00 |
| 121.00 | ||
| 12 July | BGC Reach plc | 314.00 |
| 435.00 | ||
| 12 July | Cheque 23455 | 499.00 |
| 64.00 o/d | ||
| 15 July | Balance c/f | 64.00 o/d |
1When a business has cash in its bank account, it regards it as an asset. Assets are shown as a debit balance in the cash at bank general ledger account. To the bank, however, the situation is a 'mirror image' opposite. To the bank, when a business has cash in its account, the bank 'owes' that amount to the account-holder who can withdraw the cash at any time. From the bank's perspective, the customer's bank balance is therefore a liability and in the accounting system of the bank, this is reflected as a credit balance (it is a liability of the bank) in the customer account and the bank statement.
When a bank account is overdrawn, the business owes cash to the bank. In the business general ledger account, this is recorded as a credit balance. To the bank, the situation is again the opposite. The account holder owes the bank money, and is therefore a receivable of the bank. Receivables are assets and, to the bank, bank the overdrawn balance is an asset. In the customer account and bank statement this is presented as a debit balance and by old (i.e. overdrawn).
2For each transaction, the bank statement shows the date it was processed by the bank and the cash was actually paid into or out of the account. The amount of the receipt or payment is shown, together with the resulting balance on the account.
3For payments by cheque, the cheque number is shown.
4Payments and receipts by standing order, direct debit and BACS are usually shown by the letters SO, DD and BAC respectively.
5Receipts by cheque are shown by the letters BGC or the words 'bank giro credit', together with some description to identify the receipt or the payment.
6More modern forms of electronic payment or cash transfer may identify the name of the person or business transferring cash, perhaps as payment of an invoice.