Statement (Junior Cert Business Studies): Revision Notes
📚Revision Notes
Statement
What is a statement?
A statement is an important business document that suppliers regularly send to their customers. When businesses work together frequently, suppliers create statements to provide a clear overview of all financial dealings between the two parties over a specific time period.
Important
A statement is a document that shows all transactions between a buyer and seller over a set period, including purchases made and payments received.
The statement serves as a summary that displays the current balance owed by the customer and indicates when payment is due. This helps both businesses keep track of their financial relationship and ensures nothing gets overlooked.
Understanding statement content
Statements contain several key pieces of information that help businesses track their transactions:
- Customer details: Name, address, and contact information of the buyer
- Supplier details: Company information, VAT number, and contact details
- Transaction history: All invoices and payments during the period
- Running balance: Shows how much money is owed at any point
- Final balance: The total amount due at the statement date
How transactions appear on statements
Statements use a debit and credit system to track money flow:
Note
Understanding Debits and Credits:
- Debit entries: Show money owed (such as invoices for goods purchased)
- Credit entries: Show money paid (such as bank transfers or payments made)
- Balance column: Shows the running total of what is owed
Practical example
Let's examine how statements work in practise using an Irish business example:
Example
Worked Example: Dublin Sports Ltd Statement
Dublin Sports Ltd supplies equipment to Fitness First gym in Cork. At the end of January, Dublin Sports sends a statement to Fitness First showing:
- 20 Jan: Invoice €15,000 (debit) - Balance: €15,000
- 28 Jan: Payment received €15,000 (credit) - Balance: €0
This statement shows that Fitness First ordered goods worth €15,000 and paid the full amount, leaving no outstanding balance.
When customers pay only part of an invoice amount, the statement will show the remaining balance that still needs to be paid. For example, if Fitness First had only paid €10,000, the final balance would show €5,000 still owed.
How to handle statements properly
Both buyers and sellers have important responsibilities when dealing with statements to ensure accuracy and maintain good business relationships.
For buyers (receiving statements)
When your business receives a statement from a supplier, follow these essential steps:
Note
Essential Steps for Statement Recipients:
- Verify calculations: Check that all amounts add up correctly and the balance is accurate
- Confirm transactions: Make sure all invoices and payments listed actually occurred
- Plan payment: Organise to pay any outstanding amount by the due date shown
- File securely: Keep a copy of the statement for your business records
For sellers (sending statements)
Before sending statements to customers, suppliers should take care to:
Note
Best Practises for Statement Senders:
- Verify customer information: Ensure names, addresses, and contact details are current
- Check opening balance: Confirm any amounts carried forwards from previous periods
- Review all transactions: Make sure every invoice and payment is properly recorded
- Validate calculations: Double-check that all amounts and balances are correct
- Maintain records: File copies of all statements sent for future reference
Record keeping importance
All business documents, including statements, must be kept safely on file. These records become essential for preparing annual accounts and need to verify their financial transactions. Proper filing systems help businesses track their trading relationships and resolve any disputes that might arise.
Good record keeping also helps businesses understand their cash flow patterns and make informed decisions about credit terms with different customers or suppliers.
Important
Remember that proper record keeping is not just good practise - it's often a legal requirement for businesses and essential for tax preparation and financial reporting.
Remember!
Summary
Key Points to Remember:
- Statements summarise trading relationships - They show all transactions between buyer and seller over a set time period
- Check everything carefully - Both parties should verify that all details, calculations, and transactions are accurate before taking action
- Pay on time - Buyers should organise payment by the due date to maintain good supplier relationships
- Keep proper records - All statements must be filed securely as they're needed for preparing business accounts
- Statements help cash flow management - They provide clear visibility of money owed and received, helping businesses plan their finances effectively