What is Ledger Balance?
Ledger balance is the resulting balance when the total debit is subtracted from the total number of credits. It is shown in every customer’s bank statement.
A bank account would basically show two balances. The first one represents the ledger balance while the second is the current balance. The current balance is the amount that may be withdrawn on a regular basis. Ledger balance should not be mistaken with the outstanding balance. While the latter only includes the current fund available in a person’s bank savings account, ledger balance comprises all other checks which have not been paid yet. Thus, ledger balance can also refer to the amount minus any check deposits that have not been cleared yet. It may also include debits that are waiting to be paid upon and incoming funds which are not yet available.
Keeping track with the ledger balance is an important asset in financing. Especially for people with bank accounts, checking the ledger balance allows easy outlook in monitoring cash flow and expenditures. One way to track the ledger balance is to create a general ledger or a collection of daily account charts. In most cases, banks and account holders would record the general ledger on computers using specific software programs. Some businesses use the double-entry accounting system to record cash transactions. With this, balances are automatically tallied in the software like journal entries. As soon as credits get paid and debits are drawn against the holder’s account, the remaining balance will immediately reflect on record. This is why bank transactions can produce account statements in a matter of minutes. Ledger balance will also keep account holders abreast of their monthly transaction and verify payment mistakes.
A ledger account can also be a part of an income statement. It represents the amount paid to specific obligations, such as electricity bill, water bill, and many more.