What is Ledger Balance?
1120 reads · Last updated: December 5, 2024
A ledger balance is computed by a bank at the end of each business day and includes all withdrawals and deposits to calculate the total amount of money in a bank account. The ledger balance is the opening balance in the bank account the next morning and remains the same all day.The ledger balance is also often referred to as the current balance and is different than the available balance in an account. If you log into your online banking, you may see your current balance—the balance at the beginning of the day—and the available balance, which is the aggregate amount at any point during the day.In banking and accounting, the ledger balance is used in the reconciliation of book balances.
Definition
The general ledger balance is calculated by banks at the end of each business day, including all withdrawals and deposits, to determine the total amount in a bank account. It is the opening balance of the bank account the next morning and remains unchanged throughout the day. The general ledger balance is often referred to as the current balance, which is different from the available balance in the account.
Origin
The concept of the general ledger balance originates from fundamental banking and accounting principles aimed at ensuring accurate daily transaction records and reconciliation of ledger balances. With the digitization of banking systems, the calculation of the general ledger balance has become more automated and precise.
Categories and Features
The general ledger balance is primarily divided into two categories: current balance and available balance. The current balance refers to the balance at the start of each day, while the available balance refers to the total balance available at any time during the day. The current balance reflects the actual financial status of the account, whereas the available balance considers pending transactions.
Case Studies
Case 1: A bank customer has a general ledger balance of $5000 at the end of the day, which becomes the opening balance of the account the next morning. Case 2: Another customer conducts multiple transactions within a day; although the available balance fluctuates, the general ledger balance remains unchanged throughout the day, ensuring reconciliation accuracy.
Common Issues
Common issues include confusion between the general ledger balance and the available balance. Investors often mistakenly believe they are the same, but in reality, the general ledger balance does not include pending transactions, whereas the available balance does.
