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What Is A Ledger Balance

What Is A Ledger Balance?

by Altaf

Do you know what is a ledger balance? If you are new to this term, then you have come to the right place! Many financial institutes use different names for different elements of their business. It helps them to easily deal with larger transactions. Today, we will study what is a daily ledger balance in detail. The term ledger balance is often compared with available balance. So, I have also discussed the major difference between ledger balance and available balance in short. Make sure you check out ledger balance examples too. You can keep on reading further to know what is a ledger balance in detail.

What Is A Ledger Balance?

A Ledger Balance is a balance in an individual’s account at the beginning of each business day. The term ledger balance is also called the current balance. It includes all the details of transactions (collected or disbursed) that were posted from the previous night.

In short,

Ledger Balance = Credits for a given accounting period – Number of debits for a given accounting period.

This term is most commonly used in banking and accounting for resolving book balances. You can continue reading to know more about what is a ledger balance in banking.

How To Withdraw Ledger Balance?

The ledger balance is generally updated at the end of the day once all the transactions are done. The working procedure of ledger balance is quite simple.

Here, I have mentioned three simple steps that will help you to learn what is a ledger balance in a checking account

  • Step 1: Note Down Your Opening Balance

First, you have to note down your ledger balance displayed at the beginning of the day. With the help of this, you can calculate your updated ledger balance later on.

  • Step 2: Add On All Credits

After this, all the successful payments can be added to your total of the opening balance. This includes deposits, Interest income, Wire transfers, cleared checks, credit or debit card transactions.

  • Step 3: Subtract All Debits

In the end, subtract all debts that you have made during the entire day.

Once the addition and subtraction of your credits and debits are done, you will get your current ledger balance.

Note: But you must keep in mind that, the bank statement provides the ledger balance to a particular date only. Any deposits or checks written on or after this date won’t appear on the statement.

If you are interested to discover more about what is a ledger balance on a debit card, then keep on reading. 

Importance Of Ledger Balance

In the above sections, I have explained what is ledger balance in a checking account in detail. Now, check out the importance of ledger balance in banking.

  • It is mostly used to determine whether the requirement to maintain a minimum balance is being satisfied or not.
  • The ledger balance helps to keep your records up to date.

You can keep on reading further to know what is ledger balance in a bank account.

Ledger Balance Vs Available Balance

Many of us get confused between ledger balance and available balance. So, here we will learn what is a ledger balance and available balance.

  • We know that,

Ledger Balance = Credits for a given accounting period – Number of debits for a given accounting period.

  • Whereas,

Available Balance = Balance available after any credit or debit in the account.

Though both these terms represent the account balance but are different from one another.

Below, I have listed down a few points that will help to learn what is a ledger balance vs available balance.

  • A ledger balance is an opening balance that is displayed at the beginning of the day. While available balance is the sum of funds that is accessible for withdrawal purposes.
  • Generally, the ledger balance does not change constantly. On the other hand, the available balance keeps on fluctuating very often.
  • The ledger balance isn’t updated frequently, while the available balance is always continuously updated.
  • The available balance is usually calculated by subtracting check, permanent, and temporary holds from the ledger balance. In contrast, the ledger balance is only updated at the end of the day.
  • Unlike available balance, ledger balance does not contain any debits and credits earned from transactions not updated to bank accounts.

Ledger Balance Example

By now we have studied what is a ledger balance at a bank in detail. Here, I listed down some examples of the ledger balance, have a look at them.

  • Andrea has $500 as a ledger balance, out of which $300 belongs to a check that she has recently deposited. But her deposited check is still not cleared. Due to this, Andrea can withdraw only up to $200 from her bank account.
  • Assume that you have $20,000 in your account, which is your ledger balance. After a while, you deposit $1,000 into the same account. Therefore, your available balance will be $21,000. But here, the ledger balance will still remain the same till the transactions are cleared.
  • Joey has $200 as his ledger balance. His total credits for the day are $35, which he has deposited are his account. Also, his total debits for the day are $10 that he has withdrawn at an ATM. Therefore, now his total available balance is $225.
  • Now, assume that your ledger balance is higher than available balance that is $27,312. Afterward, you deposit a cheque of $10,000 to your account. Once the amount is credited, your available balance will become $37,312.

When Will The Ledger Balance Be Available?

Generally, the ledger balance is always available at the beginning of each business day.

What Is A Balance Running Ledger T Account?

A balance running ledger account is the total amount present on the debit and credit sides. It is one of the simplest and easiest ways to manage individual accounts.

FAQ

What Is The Difference Between Ledger Balance And Available Balance?

The main difference between ledger balance and available balance is as follows.

  • A ledger balance is an opening balance that is displayed at the beginning of the day. While available balance is the sum of funds that is accessible for withdrawal purposes.
  • Generally, the ledger balance does not change constantly. On the other hand, the available balance keeps on fluctuating very often.
  • The ledger balance isn’t updated frequently, while the available balance is always continuously updated.
  • The available balance is usually calculated by subtracting check, permanent, and temporary holds from the ledger balance. In contrast, the ledger balance is only updated at the end of the day.
  • Unlike available balance, ledger balance does not contain any debits and credits earned from transactions not updated to bank accounts.

Can I Withdraw My Ledger Balance?

Yes, you can withdraw your ledger balance by simply adding and subtracting your credits and debits from the previous day.

What Is Ledger Balance Example?

Here, I have given two examples of ledger balance.

  • Andrews has $500 as a ledger balance, out of which $300 belongs to a check that he has recently deposited. But his deposited check is still not cleared. Due to this, Andrews can withdraw only up to $200 from her bank account.
  • Assume that you have $20,000 in your account, which is your ledger balance. After a while, you deposit $1,000 into the same account. Therefore, your available balance will be $21,000. But here, the ledger balance will still remain the same till the transactions are cleared.

How Long Does Ledger Balance Take?

A ledger balance is always calculated at the end of the day; thus it takes only one day to calculate. 

How To Convert Ledger Balance To Available Balance?

You can convert your ledger balance to the available balance by depositing or withdrawing money from your account. Below, I have given an example for a better understanding.

  • Joey has $200 as his ledger balance. His total credits for the day are $35, which he has deposited are his account. Also, his total debits for the day are $10 that he has withdrawn at an ATM. Therefore, now his total available balance is $225.

How To Withdraw Ledger Balance Zenith Bank?

You can withdraw the ledger balance from Zenith bank by using these steps.

  • Step 1: Note Down Your Opening Balance

First, you have to note down your ledger balance displayed at the beginning of the day. With the help of this, you can calculate your updated ledger balance later on.

  • Step 2: Add On All Credits

After this, all the successful payments can be added to your total of the opening balance. This includes deposits, Interest income, Wire transfers, cleared checks, credit or debit card transactions.

  • Step 3: Subtract All Debits

In the end, subtract all debts that you have made during the entire day.

Once the addition and subtraction of your credits and debits are done, you will get your current ledger balance.

Conclusion

From my above-written article, you got to know what is a ledger balance at a bank in detail. In simple words, it is an opening balance displayed in the account at the beginning of the day. Here, I have also discussed how ledger balance is calculated along with some different examples. The ledger balance always remains unchanged throughout the day. Whereas the available balance frequently fluctuates depending upon your transactions. Both these terms are important for account holders to keep their records up to date. Thus, this has been a guide to what is a ledger balance and its meaning.

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