Introduction
As with any type of business, recording and updating all transactions with buyers is a norm. Statements of account are frequently presented to suppliers and trading enterprises involved in cash on delivery or credit sales.
What is a Statement of Account?
A statement of account reflects every transaction that occurs at every time between a seller and its specific buyer. Statements of account are usually sent to buyers to inform them of the total credit sales for a specified period. Statements of account are also used as a collection tool to accurately calculate the buyer’s delinquent payments.
This is an effective method of record, as it will usually be emailed, followed by a payment link and allows the buyer to use a credit card to pay what is owed. These statements of account also allow buyers to detect any inconsistencies in financial matters, as they are able to track every paid and unsettled sale. Financial statements are usually issued to familiar buyers and supplement the personal invoices sent to their clients after any type of purchase.
The Importance of Having a Statement of Accounts
In most cases, having a financial statement allows suppliers to see how the business is going and lets them know what has not been paid by the buyer. Both parties can compare their related accounts with each other and make sure they are on the same page. For suppliers, it provides a convenient reference to see what buyers have paid and what they still owe.
Legally, having financial statements is very important, especially for businesses that involve the sale and delivery of goods without any agreement in written form, i.e. only purchase orders and invoices.
More recently, in the recent Shaoxing County Baimei Trade Co Ltd v Khaleeg Marketing Sdn Bhd (Civil Suit No WA-22NCC-378-08/2020) case, the significance of the financial statements was known and judicially recognized, the High Court judge ruled Supporting the plaintiffs, who ran a habit of accounting statements even though the plaintiffs had no documents to support the case.
The following is a brief overview of Shaoxing County Baimei Trade Co Ltd v Khaleeg Marketing Sdn Bhd (Civil Suit No WA-22NCC-378-08/2020):
The case involved a claim by the plaintiff against the defendant for money owed for the sale and delivery of goods. The defendant chose not to provide evidence, and filed a plea of no case on the grounds that the plaintiff failed to prove that there was a current account between the plaintiff and the defendant.
The High Court considered the plaintiff’s evidence and was satisfied that the balance of probabilities had been demonstrated that there was a recurring contractual relationship between the defendant and the plaintiff. In addition to this, there is a running account of the amount owed by the defendant to the plaintiff, which enables the plaintiff’s claim to be realized.
The High Court relied on the supplier’s account statements and recognized that they constituted a continuing contractual relationship between the supplier and the buyer. If the supplier can establish that the continuing contractual relationship has been maintained and has been formally acknowledged by the buyer, it binds the buyer to liability for the amount not paid when due.
Based on the above, the account statement includes the following:
- the name of the seller of the goods;
- the name of the buyer of the goods;
- Invoices issued by the Seller to the Buyer with relevant details such as the contract number, description of the goods, quantity ordered, unit price of the goods and the outstanding amount in each invoice issued;
- the total outstanding amount of the invoice;
- Carryforward total arrears;
- payment received by the buyer;
- any outstanding amounts; and
- The signature on the bottom of the account statement reflects the buyer’s intention to acknowledge its responsibility to the seller for the outstanding amount on the account statement.
The High Court allowed the plaintiff’s claim on the grounds that the plaintiff had proved on the balance of probabilities that the defendant owed the amount stated in the bill. This clearly shows the importance of having a statement of account.
Conclusion
In conclusion, it is good business practice for a business to maintain a statement of account for all business transactions with its buyers. In the case of items sold and unpaid payments, a statement of account may only be of assistance to a business owner in the absence of other documentation to prove their circumstances.
