Ledger Balance

• What is the Meaning of Ledger Balance?
• How Does the Ledger Balance Work?
• Advantages of Ledger Balance 

What is the Meaning of Ledger Balance?

Ledger Balance refers to the total balance of an account recorded in a company's ledger or accounting system at a specific point in time. It represents the sum of all transactions in the account, including deposits, withdrawals, and any fees or charges applied to the account. The ledger balance may also include any interest earned or paid on the account.

The Ledger balance does not hold any information related to incomplete or under-process transactions in an account. 

The Ledger balance differs slightly from the financial term ‘account balance’ used in the banking system. Whereas the ‘account balance’ shows the real-time balance available in an account that changes its value throughout the day. In Accounting, the term ‘ledger balance’ reconciles book balances thoroughly that remain the same for a particular day. Also, it represents the account balance without any information about pending transactions. 

How Does the Ledger Balance Work?

At the end of a Bank’s working day, the bank’s employee updates the Ledger balance when all the financial transactions have been accepted and, further, have been processed. Banks estimate the Ledger balance after reporting all financial transactions. Here, the term ‘financial transaction’ implies cash deposits, cleared checks, debit transactions, wire transfers, interest income, cleared credit cards, and any error detection and correction. In other words, the Ledger balance reflects the current balance amount in one account. 

The Ledger balance differs from the available account balance. The value of a Ledger balance varies from each working day to each working day. 

Advantages of Ledger Balance

As noted above, the ledger balance is not accurate account information. It carries details of the end of the last working day. If your balance sheet is not up to date, it may give you false information about your account details. Here are some top benefits of updating the Ledger balance:

• It helps classify account management.

• It represents the account information at the end of the day.

• It prepares a trial balance.

• It shows the Financial Position at the given point in time

• It collects all the financial transactions associated with an account.

• It serves statistical data.

• It prevents fraud and suspicious activities.