Page 14 Chapter 2

CHAPTER 2
Selling Goods and Services

The final document we will look at in this section is the statement.

Just as your bank statement will show the transactions which have occurred between you
and your bank, so a statement of account for a customer will show all the transactions
between the customer and the supplier.

As you have seen, a customer may have been allowed to pay their invoice after an agreed
period of time (7 days, 30 days or even 60 days are typical). You can probably imagine that
regular customers will have several outstanding invoices, so a statement of account is sent
to the customer, usually monthly, so that both parties are aware what is still owed by the
buyer to the supplier.

The statement will begin with the balance b/f. (Sometimes this is shown as b/d meaning
brought down from the previous period). B/f stands for ‘brought forward’ and shows the
amount still owing at the beginning of the month, or brought forward from the previous
month.

Any new invoices will be added to the total and any payment will be taken from the total.

You must always remember to include any credit notes which have been issued, including
those issued because of a prompt payment discount which has been taken. You must
remember the prompt payment discount because if you don’t the customer will still be
showing as owing an amount, when in fact the account has been paid in full.

The statement will finally show the remaining balance. This amount will be ‘carried forward’
(c/f) to the next statement.

If you look at the statement of account on the next page you will notice that invoices (or any
amounts which increase what is owed) are called debits and go on the left. Any amounts
which decrease the amount owed are called credits and go on the right. We will look at
debits and credits in much more detail later in this book, but for now remember which side
each is on and what it means in the statement.

Transactions are listed in date order. Only prompt payment discounts will be included (not
trade or bulk discounts since these are already given in the invoice figure). The prompt
payment discounts are only stated once they have been taken and not when they are
offered. After all, the customer may not pay within the time allowed to qualify for the
discount. Prompt payment discounts will be labelled discounts allowed.

(Not all the transactions on the statement have been shown in the invoices and credit notes
above).

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