What Is Statement of Account? It’s a List of Your Transactions
A statement of account, or account statement, is issued by a vendor to a client. It lists out all the financial transactions between the two businesses within a specific time period (typically, monthly). The statement may reflect a zero balance, if not, it acts as a reminder to the client that money is due.
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NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. If you need income tax advice please contact an accountant in your area.
Is a Statement of Account an Invoice?
A statement of account is not an invoice. It is a report issued by a vendor and sent to a client, typically in a PDF format delivered through email.
A statement of account captures the financial transactions between the two companies during a specific period of time, usually a one month period. The statement lists out all the invoice amounts and payments. It would also include refunds from the vendor too. The statement of account may show an amount still owing by the client.
An invoice is a different document. It is also issued by the vendor, but it is a bill for one transaction only.
Every invoice for the time period being documented, regardless of whether it has been paid or not, is listed as a line item in the statement of account. The corresponding payments will also be there. In this way, both vendor and client can see if a payment is missing or if the client’s account is up to date.
Here are the differences between what you will see on an invoice and a statement of account. An invoice:
- Describes the items purchased (or services provided) and cost per unit.
- Adds taxes.
- Displays the total amount owing.
- Provides payment terms and payment details.
A statement of account:
- Lists all previous invoice amounts, with invoice numbers and dates, as individual line items.
- Lists all payments or credits as individual line items.
- Displays an outstanding balance, if any, from all transactions.
- It may list cost buckets (more on that below).
Why Is Statement of Account Important?
A statement of account acts as a tool for vendors to remind clients that their accounts are not yet fully paid up. This is important because the resulting client payments increase a vendor’s cash flow, and allow management to spend the money on the resources they need to keep the business going.
The statement of account is also important for a client, because it allows them to track their spending. Also, the statement could help them save money; if an amount is owed, they can pay it now and perhaps avoid a late fee.
For more tips on how to speed up payments to your company, read “What Are Trade Receivables”.
What Goes into a Statement of Account?
There are many different statement of account templates, but typically they all include:
- Vendor’s name, address, phone number, email.
- Client’s name, address, phone number, email.
- Statement date (or date of issue).
- Statement number.
- Customer ID # (or Account #).
- Previous balance (from the last statement of account issued).
- All transactions (each transaction is given its own line, whether invoice, payment or credit).
- Payment slip (optional).
Because a company may have many invoices out to the same client, with different due dates, often a vendor will include a section that lists out “time buckets”, showing how overdue a particular amount is. Time buckets in a statement of account could look something like this:
- Current: $42.00
- 0 – 30 days: $0.00
- 31 – 60 days: $0.00
- 61 – 90 days: $0.00
- 90+ days: $0.00
The above example would show a customer that he currently owes $42.00, but has nothing overdue.
Lastly, there may be a note reminding the customer that this is not a bill but a statement. For instance, when the client see’s the $42.00 owing, he may already know that the invoice is in for processing and that he does not need to act.
Bank Statement of Account
Banks also provide account statements for their customers. They are very similar to the statements generated by businesses for their clients, in that they list every transaction during a specific time period. This is common for any type of account a bank offers – savings account, checking account or brokerage account.
With the advent of digital technology, banks don’t issue as many personal account statements anymore. This is because customers can now go online to pay their bills or move their money, and can see transactions right up to the second they log in. Banks will even ask their customers to “switch to paperless” in order to save the cost of printing and mailing a statement of account.