Ledger BalanceExplained & Defined

Written By:
Adiste Mae

What is a Ledger Balance?

The Ledger Balance refers to the ending balance of a bank account after deducting all the withdrawals and adding all the deposits of each business day.

The balance at the close of the day is the beginning balance the next day and will remain the same all throughout the day.  

Those who have bank accounts will notice two balances when they log into their online banking – a current balance and the available balance.

The current balance is the same as the ledger balance whereas the available balance refers to the amount that is accessible for the account holder’s withdrawal. 

An important use for the ledger balance is that it is used in bank reconciliations and accounting reconciliations.  

How Ledger Balances Works

At the end of each banking day, all transactions related to the account are processed, cleared, and posted such as the following:

• Deposits
• Wire Transfer (send and receive)
• Cleared Checks
• Cleared Credit Card Transactions
• Cleared Debit Transactions
• Interest Income
• Correction of Errors, if any

After all the above are posted in the account holder’s account, the ending balance becomes the beginning balance at the start of the next business day. 

There will be cases when wire transfers to be received are not yet posted on the statement of the account holder.

This delay is mainly caused by the late receipt of the money transferred from the originating bank that issued the check or made the transfer.

However, once the transfer has been completed, the amount will be made available to the account holder. 

When the ledger balance has been computed as of a particular date, any checks issued or funds transferred on or after this date will not be reflected in the statement.

For accounts that are required to maintain a specific amount of minimum balance, a ledger balance is used in determining that.  

Ledger Balance vs. Available Balance

It is important to understand the difference between a Ledger Balance from an Available Balance.

The latter refers to the amount that is available for withdrawal by the account holder whereas the former refers to the beginning balance from the previous business day and will remain the same all throughout the day. 

The Available Balance will show the real-time balance of an account and will change frequently depending on the transactions cleared (ATM withdrawals and deposits, over-the-counter withdrawals and deposits, bills payment, etc.).

But account holders need to keep on checking the balances of both because checks just issued will not be reflected immediately.

Without sufficient funds, the account holder will be charged an overdraft fee and other fees imposed by the bank of the other party. 

Importance of the Ledger Balance

Understanding what the Ledger Balance is will help account holders understand the balances that they see on their bank statements or in their online banking accounts.

Typically, when a person logs into their online banking, they will see two balances – a ledger balance and the available balance.

A ledger balance is simply the beginning balance of a person’s account and this amount will remain the same for the rest of the day.

The available balance changes depending on the deposits, withdrawals, payments and charges posted on the account holder’s account. 

Upon receipt of the bank statement, the account holder must understand that the statement balance is the ledger balance – the amount that is available as of the statement date and will not reflect any transactions that happened after the statement has been generated. 

While the ledger balance is essential in knowing how much money is available to the account holder, it will not be able to reflect the real-time balance of the account.

As such, it is more prudent for the account holder to maintain their own ledger to see the actual money available in their account when all the payments issued are cleared and money in transit is received.