The Purpose of a Bank Statement

A statement is your bank's report on how it has managed your money over the preceding month. Statements are not hard to understand, but each bank has developed its own unique format and the first time around with a new bank, you may need to spend a little extra time discovering where they have put the information you need.

The Facts

A bank statement reports on your activities (withdrawals, checks paid, interest earned, and service charges or penalties incurred on an account) and shows the additive effect of those transactions on your account's balance through the date the bank prepared the report.
Your bank, other financial institutions and the companies whose credit cards you use, will send you statements monthly.
Other institutions, companies whose stock you own, mutual funds and brokers with whom you have an account, tend to send their statements on a quarterly basis, usually in the month following the close of the preceding quarter.

A Comparison

Statements let you compare the bank's record of your deposits and withdrawals (checks written, for example) with your own records and give you notice of any interest earned and fees charged so you can add that activity to your own records.
Historically, when people--rather than computers--handled your transactions, banks would occasionally make an error in their computations. That often made it worth your while to review their work.
Today, even though good personal financial managers still check the bank's data to ensure there were no unauthorized charges, withdrawals and transfers, they are more likely to discover and correct their own "human" errors during the reconciliation process than they are to find bank errors.

What You Have

Your monthly statement tells you how much money you have, as opposed to how much you thought you had. You do this by "reconciling," also called "balancing," your account.
Balancing involves deducting "outstanding" debits or credits from the bank's "ending" balance shown on your statement. The result is the amount you actually have.

Written Record

Your monthly statements provide you with a written record of your financial activities for tax purposes as well as for "proving" your income (for example, if you are applying for a mortgage loan, the lender may ask to see the last several years of your bank statements). As with taxes, it is a good idea to save your bank statements for three to six years before disposing of them.

Function

Managing financial accounts requires paying close attention to your record-keeping. In the days when there were only three ways to spend your money (cash, revolving charge accounts or check), record keeping didn't present the challenge it does with the use of debit cards and ATMs, where the only record of the transaction is a flimsy receipt that's as easy to lose as it is to ignore.

Future

As banks transferred from handwritten ledgers to computers in the late 1950s and 60s, so does the advent of the Internet now provide an opportunity for many customers to access their bank's computer systems directly using their own personal computers, giving them a way to manage personal finances on a close-to-real-time basis.