Needless to say, due to the increasing technological advances, banking transactions have become a crucial part of our daily lives. However, there is a great diversity of banking terminology that not many of us are aware of. One of them must be ledger balance, a phrase that we use so frequently without realizing its true meaning.
Sometimes, we even confusingly mistake the term a ledger balance for the available balance term. So what is a ledger balance? Keep scrolling through our following article, and you will soon figure it out.
What Is A Ledger Balance?
To put it simply, a ledger balance means the available money in your account after being computed by the bank at the end of your day. It includes all transactions in your day, like withdrawals plus the deposits, to calculate the total amount of money left. The ledger balance has no change all day and just opens the balance in the bank account the next morning.
Also, people refer to the ledger balance as the current balance. If you log in to your online banking and check your account, you will just the current balance, which is the balance at the onset of your day. This balance will just change when you check it the next morning.
For those who learn economics which is majoring in banking and accounting, we often see this term in the reconciliation of book balances.
How A Ledger Balance Works
After answering the question: what is a ledger balance? Let’s have a further look into how it works.
After all successful transactions at the end of your business day, the bank will automatically update your ledger balance. To calculate this balance, banks have to consider all elements in the transactions like deposits, cleared checks, interest income, debit transactions, etc.
Also, it still includes the correction of errors before. The final result will show the existing balance on the morning of the next business day.
Occasionally, the pending deposits may have unwanted processing delays. The main reason for this is that there has been some problem with the funds received. At first, the bank must receive funds from the person or financial institution or agencies who are responsible for the check or wire transfer. The money is only accessible to the account holder until the money has successfully been transferred.
About the bank statement, it just appears at a particular date. Any deposit checks that are written on or after this date will not appear on the statement. Moreover, the ledger balance may determine how satisfied the account holders are in maintaining a specific minimum balance.
Ledger Vs Available Balance
As mentioned above, most people face a common mistake in mistaking ledger balance for available balance. However, if you pay more attention to this, these two terms are quite easy to differentiate.
The available balance is the aggregate funds after all transactions at any point of your day. Meanwhile, the ledger balance remains all day, which does not update real-time transactions.
Whenever a transaction hits the bank account, the available balance will change right after that. It includes ATM withdrawals and all transactions with the bank.
When understanding the difference between ledger balance and available balance, you will have a more proper financial plan for yourself. If you just view the ledger balance, you may tend to withdraw more money than available.
Moreover, you will also have more withdrawing fees from the other party’s bank or business. Therefore, you should control your balances more frequently to avoid unauthorized transactions or errors from the bank.
The Importance Of A Ledger Balance
Once again, the ledger balance is the balance at the onset of your day. This balance will remain unchanged until the next day.
When you log in to your mobile banking, you may see both the current and available balances. This will tell you the proper amount of money to use at your disposal.
Furthermore, you should not rely on bank statements. As mentioned above, the statement date is the same as the date of the ledger balance. Bear in mind that if you do any transactions after the statement date like deposits, withdrawals, or anything else, your available balance will change.
Finally, make sure that you are working with the latest banking version. This will help you to get the updated balance at all times. What calls for special attention is that you will have less risk of having errors in money transactions with other banking parties.
To sum up, a ledger balance is the available amount of money in your account after having been computed by the bank at the end of your day. Also, you discriminate a ledger balance with the available balance to have the most proper financial plan.
So again, what is a ledger balance? We bet you have got your answer now!