What is Ledger Balance?
A bank calculates a ledger balance at the end of a business day. The bank looks at both withdrawals and deposits within an account to determine the total money in a bank account. This balance is reflected as the opening balance the next morning and it remains the same throughout the day. It is the current balance in your account and is different from the available balance. Ledger Balance is used in banking and accounting for reconciling book balances.
Features of Ledger Balance
The main features of a ledger balance are as follows:
- The ledger balance of a bank account gets updated at the end of every business day. You get this amount only after all the transactions within an account get approved and processed by the bank.
- A bank calculates the Ledger balance amount after they post transactions related to deposits, cleared checks, wire transfers, credit card or other debit transactions, along with correction of any errors.
- The bank statement provides the ledger balance but only up to a particular date. If any deposits are made or cheques written on or after that date, they will not reflect on the statement until the account holder gets a new bank statement for a different date.
- The Ledger Balance will change at the end of each business day when the bank processes the deposits or withdrawals from your account.
- The ledger balance helps ascertain if the account holder maintains a specific minimum balance in their account.
- When you withdraw money from your account, it will immediately get reduced from your ledger balance. But it will not reflect in your bank account until the money gets debited from your account.
Difference between Ledger Balance and Available Balance
The main differences between Ledger Balance and Available Balance are as follows:
Ledger Balance | Available Balance |
Definition |
The ledger balance represents the account balance at the end of a business day. | The available balance is the total amount that an account holder can withdraw from their bank account. |
Accessibility |
You cannot access your Ledger Balance at all times. | You can access the available balance at any point in time. |
Withdrawal of money from your account |
When you withdraw money from your account, it will get reduced from the ledger balance immediately. | When you withdraw money from your account, it will get reduced from the available balance only after the money gets debited from your account. |
Incomplete transactions |
Any incomplete transactions will not reflect in the ledger balance. | Any transaction, whether complete or incomplete, will reflect in the available balance. |
Conclusion
Ledger Balance is a financial term that reflects the actual balance in your bank account, and it includes only those transactions that have been accounted for by the bank.
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FAQs
Ledger balance is the amount of money in your account that might not account for transactions made during the day, such as charges or deposits. The available balance is the ledger balance less transactions made during the day.
What is the difference between ledger balance and available balance? ›
The ledger balance represents the account balance at the end of a business day. The available balance is the total amount that an account holder can withdraw from their bank account. You cannot access your Ledger Balance at all times. You can access the available balance at any point in time.
What is the importance of ledger balance? ›
The importance of Ledger Balance
Understanding your ledger balance helps prevent overdraft charges, bounced checks, and inadequate funds for automated debits like bill payments. In addition, you must keep track of your ledger balance if you need to maintain a minimum bank account balance.
Can I withdraw money from my ledger balance? ›
Withdrawing from your ledger balance is no different from a regular bank withdrawal. It involves accessing your account and using a chosen method to take funds out, such as ATM or electronic transfer. Just ensure the amount doesn't exceed your available balance to avoid issues.
What is the purpose of balancing the ledger? ›
The main purpose of balancing a ledger account is to know that every debit and credit balance is offset from each other. In a double-entry system, all credit totals must equal all debit totals.
Why is my ledger balance less than my available balance? ›
The ledger balance isn't updated until the end of the business day. The available balance is the ledger balance with pending transactions added or subtracted. These pending transactions can include checks, wire transfers, deposits, and bank card charges.
How long does money stay in ledger balance? ›
Your ledger balance will update only after all transactions have been processed by the bank at the end of the business day. Your new opening balance the next day will be your available balance if all outstanding transactions have been updated at the bank.
What is ledger balance in simple words? ›
What does ledger balance mean? The ledger balance, or current balance, is the opening amount of money in a given checking account each morning, and remains the same throughout the day.
What are the advantages and disadvantages of ledger? ›
The advantages of a ledger are as follows:
- It collects information.
- It shows the financial position at any given point in time.
- It helps in maintaining classified accounts.
- Helps in preparing a trial balance.
- It provides statistical data.
- It determines the result of each account.
Your available balance is the total amount of money in your account that you can use for purchases and withdrawals, as it excludes pending transactions and check holds from your account balance. However, the available balance will not show checks that haven't been cashed or deposits which haven't posted.
Your Ledger is protecting an encrypted copy of your seed phrase inside of it with military-grade cryptographic hardware, and remember that it's your job to make sure your recovery phrase stays offline and is never entered into a computer, into a phone, or shared with anyone or any application asking for it.
Why is my available balance higher than my current balance? ›
Your current balance reflects the amount of money in your bank account at any given moment. Your available balance is the amount of money you have to spend, including any pending payments and deposits. The key difference is that your pending purchases do not appear in the current balance.
How do I change my ledger balance to available balance? ›
The ledger balance, as opposed to the available balance, does not include real-time transaction updates and therefore remains the same throughout the day. So, to change your ledger balance to the available balance, amend the ledger balance to account for the transactions that hit the bank during the day.
How do you maintain a ledger balance? ›
Closing the books at the end of an accounting period
- Post entries to the general ledger. ...
- Total the general ledger accounts. ...
- Prepare a preliminary trial balance. ...
- Prepare adjusting journal entries. ...
- Foot the general ledger accounts again. ...
- Prepare an adjusted trial balance. ...
- Prepare financial statements.
Balancing a general ledger involves subtracting the total debits from the total credits. All debit accounts are meant to be entered on the left side of a ledger while the credits are on the right side. For a general ledger to be balanced, credits and debits must be equal.
How do I move money from my ledger balance to available balance? ›
The ledger balance, as opposed to the available balance, does not include real-time transaction updates and therefore remains the same throughout the day. So, to change your ledger balance to the available balance, amend the ledger balance to account for the transactions that hit the bank during the day.
Does ledger balance mean pending? ›
Ledger balance is how much money you have in your account at this exact second. It doesn't take into account pending transactions.
Can I spend my available balance? ›
What does available balance mean? Your available balance is the amount of money in your account, minus any credits or debts that have not fully posted to the account yet. This is the amount of money you can spend, but it may fully reflect the money you have at your disposal.
Can I withdraw my available balance? ›
In a checking account, the available balance is the amount of money that the account holder can withdraw immediately. The current balance, by contrast, includes any pending transactions that have not yet been cleared. The bank will honor any withdrawal or payment you make up to the available balance amount.
