What does "ledger balance" mean?


Quick Answer

The ledger balance is the total amount of funds in an account at the beginning of a business day. The deposits and debits that take place throughout the day determine an account's available balance.

Continue Reading
What does "ledger balance" mean?
Credit: Levent Ince E+ Getty Images

Full Answer

Most banks operate from business day to business day, meaning that transactions that happen throughout the day are not figured into the total numbers until the next business day. Such transactions may be recorded as pending to an account.

After the close of the business day, the account amounts are recalculated based on the addition or subtraction of funds throughout the day. The new amount becomes the ledger balance on the following business day.

In some instances, banks only differentiate the ledger balance from the available balance by deposits made to an account on a given day. In this way, a ledger balance is only guaranteed to be accurate at the moment that it is posted.

Most banks impose a hold period on newly deposited checks to insure that they clear the banks on which they were written. Because ledger balances differ from available balances, it is not uncommon for bank customers to become confused about the amount of funds that are available in their accounts.

Learn more about Accounting

Related Questions