What is a ledger balance?
A ledger balance is a balance in an account at the beginning of each day, also known as the current balance. It includes all deposits or transactions that were posted from the previous night, whether any money has been collected or disbursed.
The ledger balance represents the aggregate whole of account funds available for customer use. It includes any outstanding checks as well as any pending deposits that haven’t yet been authorized for use.
There is some confusion between ledger balance and available balance. Many people mistakenly think that their available balance is their ledger balance, but that is not always the case.
Often, available balances fall into two categories:
- A ledger balance that’s adjusted for any activity during the day, or rather, the ending balance.
- A ledger balance that excludes any pending deposits and credits that are withheld for some reason or have not yet been posted.
Because the ledger balance is the beginning balance rather than end balance, as most available balances are calculated, it is incorrect to assume that they are one and the same. Many online and mobile banking services do not always display the most up-to-date information in real time.
Additionally, bank statements alone cannot be relied upon. Bank statement balances are taken from ledger balances at the time that the statement is issued. However, any activity that has occurred after the statement was issued impacts the bottom line.
It is best to keep track of your own income and expenses to know where your ledger balance is at all times. Failure to do so may result in an overdraft, which could be costly and embarrassing.
Ledger balance example
If you start the week with $1,000 in your checking account and get paid $2,000 on the 15th of the month, then your ledger balance will be $1,000 all day on the 15th. Your $2,000 may show in your available balance, depending on how quickly the check clears after the payment is received, but your ledger balance will not reflect a $3,000 balance until Tuesday at the earliest.
Want to learn more about the meaning of different parts of your bank statement? Learn more about your bank statement basics.