Understand the Terms in your Bank Statement

A bank maintains bank accounts of an individual or an organization or a depositor in the ledger of the bank and sends a copy of the maintained accounts for certain period of time, normally at the end of one month period to the depositor which is called bank statement.

Hermanson, Edwards and Maher said

A bank statement is a statement issued (usually monthly) by a bank describing the activities in a depositor’s checking account during the period.

From the above discussion it can be said that a bank statement is a statement of depositor’s bank chequing account containing detailed particulars of deposits and withdrawals including interest accrued and bank charges for a particular period, usually for a month.

A bank statement contains the following contents;

  1. Depositor’s deposit for a particular period.
  2. Depositor’s Withdrawals or payments of cheques from his/her account by the bank for a particular period.
  3. Deductions from depositor’s bank account during a particular period such as service charge, NSF (Not sufficient fund,) safe deposit box rent, printing cost of cheques etc.
  4. Cheque deposit direct into depositor’s bank account, deposit of collection of notes receivable including interest and deposit of average interest on the deposits.

A specimen of a bank statement is shown below;

Explanation of symbols

CM – Credit memoranda; INT – Interest on average balance; DM – Debit memoranda; NSF – Not sufficient funds; SC – Service charge.

Debit memorandum

The bank charges monthly fee for services rendered. The bank usually charges fee when the average bank balance of a bank chequing account comes down to a certain required amount of money.

These fees are called bank charge which is shown in the bank statement under code ‘SC’. Bank sends a debit memorandum with the bank statement wherein the detail of bank charges is mentioned.

Credit memorandum

A depositor/account holder may direct the bank to collect his/her note receivable. The bank deposits die realized proceeds of notes receivable in the bank account of the client.

The bank sends a credit memorandum for this transaction with the bank statement. Many banks pay interest on bank chequing accounts which is shown in the bank statement.

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