What is a ledger balance?

A ledger balance represents the current value of an account — it is the ending amount of money in an account after all debits and credits for a specific period of time have been recorded.

In simpler terms, it’s the final amount remaining in an account after considering all deposits (credits) and withdrawals (debits) processed by the bank at the end of each business day. This balance becomes the opening balance for the next day.

Key features of a ledger balance: 

• It is calculated daily by banks and reflects settled transactions
• It might differ from the available balance, which may not yet reflect pending transactions
• It is crucial for understanding the account’s financial health and making informed financial decisions

Frequently asked questions

What’s the difference between a ledger balance and an available balance?

The ledger balance is the actual amount of money in your account after all processed transactions are factored in. 

The available balance is the estimated amount you can currently access, excluding pending transactions that haven’t been cleared yet.

Why are ledger balances important?

Ledger balances provide a clear picture of the account’s financial standing at a specific point in time. This information is crucial for tasks like:

• Budgeting and financial planning
• Reconciling bank statements
• Identifying potential errors or discrepancies
• Managing cash flow effectively