Understanding your bank statement

 A personal financial statement is a bank document that details all transactions that have taken place during a set period of time. It also spells out the bottom line of an account. Statements are important tools for helping account holders to spot discrepancies.

Your personal financial statement gives you a clear picture of the money you spend, and what you generate as revenue in your bank account. It helps you keep track of your expenditures and thus keeps you from spending more than you intended to in the first place.

When some people see their bank statements, they are surprised that they actually spent more than they thought they did. The statement helps you to plan for both your expenditure and income. You can use it to plan for your budget.

According to Financial Web, most statements are broken into several parts, including the account summary and the detailed report.

The account summary

A personal financial statement bank document will generally include an account summary at the top of the report. This will detail the beginning balance, the ending balance and perhaps even the number of transactions, the days in the cycle, and other information. This part of a statement is basically the “executive summary.” It will display the important numbers, but will not describe how they were arrived at.

The detailed report

After the account summary, most personal financial statement bank documents will offer a blow-by-blow details of all transactions that took place during a set period of time. The information here will be offered generally by date and will include all deposits; withdrawals, including ATM transactions, cheques and pre-authorised withdrawals; any service charges, and any interest earnings.

The detailed reporting included in a personal financial statement bank document is important for balancing accounts and tracking financials for errors or oversights.

You should note that there are two types of personal financial statements: the cash flow statement and the balance sheet.

The personal cash flow statement documents your cash outflow and inflow over a certain period of time to show what your exact net cash flow is over a given period of time. Cash flows involve four main sources. These are salaries, capital gains (obtained after selling financial securities like bonds and stock), dividends (which are obtained from the various investments), and interest from savings accounts mainly.

Your net cash flow is simply the result of subtracting your outflow from your inflow. A positive net cash flow means that you earned more than you spent and that you have some money left over from that period. On the other hand, a negative net cash flow shows that you spent more money than you brought in.

If you currently have a negative cash flow or you want to increase positive net cash flow, the only way to do it is to assess your spending habits and adjust them as necessary.

The balance sheet shows you how much you are worth at a specific point in time. It is an account of your net worth, liabilities and assets.

In short, the bank personal financial statement is a method you can use to increase your net worth, which is the difference between what you own and what you owe. This figure is your measure of wealth because it represents what you own after everything you owe has been paid off. If you have a negative net worth, this means that you owe more than you own.You can increase your net worth by increasing your assets or decreasing your liabilities.

By using personal financial statements to become more aware of your spending habits and net worth, you’ll be well on your way to greater financial security.

Dealing with errors in your bank statement

Many bank customers do not go through their bank account statements for a whole year. But it is important for you to carry out an audit of your account at least once every year to make sure that any problems that have been occurring in your bank account statement for that period are corrected, according to Financial Web. If payments that are usually carried out every week are very complex, you need to carry out these audits as frequently as twice a month.

When checking for errors in your account, watch for errors such as higher withdrawals. Make sure that the interest rates, as reflected in your bank account statement, are calculated correctly where they apply. Ensure that the principal repayment amounts are entered correctly. The same case should apply to other deposits. Ensure that the figures are exact. Ensure that there are not any payments that are being made from your account without your approval. This may be in the form of auxiliary services.

The frequency with which you should request for audits of your mortgage account will depend on its complexity. If you decide that you are going to have yearly checks on your account, make sure that periodic bank account statement audits are carried out whenever a major transaction takes place.