Reviewed by Aug 27, 2020| Updated on
Meaning of Ledger Balance
At the end of every working day, a ledger balance is determined by a bank, which contains both withdrawals which deposits to determine the total amount of money in a bank account. The ledger balance is the bank account's opening balance the next morning, and stays the same all day.
The ledger balance is often referred to as the current balance, which is distinct from the account balance available. If you sign in to your online banking, you then see your current balance at any point during the day — the balance at the beginning of the day — and the total balance, which is the accumulated sum.
The ledger balance is used in Banking and Accounting to reconcile book balances.
How Does a Ledger Balance Function?
Once all transactions are accepted and processed, the ledger balance is updated at the end of the business day. Banks measure this balance after reporting all transactions, such as deposits, interest income, both-in and-out wire transfers, cleared checks, cleared credit card or debit transactions, and any error correction. At the beginning of the following business day it reflects the current balance on an account.
Processing delays in connection with pending deposits that occur because the bank must first collect funds from the financial institution of the individual or company who issued the check, wire transfer, or other payment form. When the money is transferred, it is made available to the account holder.
The bank statement only includes a specified date for the ledger balance. Deposits made and written checks on or after the date do not appear on the document. The balance of the ledger may be used to assess if the obligation to maintain a specific minimum balance is being met. It is also included on receipts from bank accounts. The balance of ledger varies from the bank account balance available.
Significance of Ledger Balance
To ensure you're still working with the most accurate balance, keeping your records up to date is always crucial. After considering any and all transactions through your account you can consider holding your own ledger, with a running total of your balance.