What Is Ledger Balance And How Does Ledger Balance Work?

Ledger Balance

While checking the balance in your account, you might have observed that there are usually two types of balances that are shown: ledger balance and the other one is available to balance. And you get puzzled to see sometimes the figure of the ledger balance, and the available balance is the same. But sometimes, it differs a lot. 

Do you also become a bit confused? So, if you are curious to know the detailed information about this ledger balance and available balance. Then you are at the right place. This article will have all the information regarding it. 

What Is Ledger Balance?

A total sum of the balance calculated at the end of the working day in any bank account, including deposits and the total withdrawal amount, is termed the ledger balance. Also, it is the opening balance of the account the next morning, which remains the same for the whole day.

Keep in mind that your available fund is always less than the ledger balance if you withdraw a certain amount from your account. This means the ledger balance may be different from the available balance.

How Does Ledger Balance Work?

The bank determines the account’s ledger balance at the end of the working hour when all the payments are processed and transactions in a whole business day. 

The bank updates the ledger balance, including interest income, deposits, debit card, credit card transactions, and how many payments an account holder received & transferred through the wire transfer in a whole day. It reflects the current balance of an account once it is updated.

There might be some delay in updating the ledger balance because the bank first receives funds from the individual, financial institution, or corporate who do wire transfer cheque payment or another mode of payment. Once the fund transfer is done successfully, the bank makes it available in your account.

A Bank statement displays the ledger balance of a particular date if you deposit funds through a cheque after the date is not displayed on it. Ledger balance may also be used to consider in maintaining the minimum balance of your account.

Also Read: Difference Between Current Account and Savings Account

How Is The Ledger Balance Calculated?

The ledger balance is calculated by adding all closing balances from every working day in a specific month divided by the number of days in that particular month.

Here, the closing balance is all the sum of payments made in and out and all pending transactions that have not been posted yet.

In simple words, the ledger balance of an account is calculated by adding the credits and deducting the debits in a whole day.

What Is The Difference Between Ledger Balance And Available Balance?

The available balance is the current balance available in your account. On the other hand, ledger balance is the sum of all transactions or payments done in a whole day, including all deposits, credits, payment through cheque, or any mode of payment. 

The ledger balance may be equal or different from the available balance in your account.

Why Is My Money In Ledger Balance?

Ledger balance displays the total balance of the account including all withdrawals and deposits together.  If you will observe on your bank statement. You will find the ledger balance till the date when the statement is released.

The ledger balance can also include the credit that is still not present in the account if you have given a cheque but that is still under a verification process.

Remember, the ledger balance may be your available balance or may not be. The ledger balance is the sum calculation of all the transactions you have made in a single day that includes your available money and the withdrawal money.

So you can see your balance available in the “Available balance” section, not in the ledger balance.

Also Read: What is a Vested Balance?

Can I Withdraw Ledger Balance Through ATM?

Yes, you can withdraw the ledger balance through ATM, but before, you must check the available balance in your account whether the fund or balance is available or not. 

The reason behind it is; the ledger balance contains all the sum of payments or transactions done in a day which is calculated at the end of the business hour. 

However, the available balance is updated even earlier than the ledger balance. Ledger balance is usually more than the actual balance or equal to it.

Can We Withdraw Ledger Balance?

Yes, you can withdraw the ledger balance. Remember, when anybody withdraws any amount from their account, it is called a debit. The withdrawal amount will be shown in the ledger balance; however, no changes will you notice in the balance available in your account until it is debited.

Does Ledger Balance Mean I Owe Money?

Not at all! The ledger balance is the calculated sum of all the credited balance and subtraction of all the withdrawal amount done last night.

It remains the uniform for the whole day till it is calculated and updated at the end of the business hour of the day. However, the available balance is shown frequently than the ledger balance.

The ledger balance displays if any disbursement and collection were posted on the last night.

Also Read: Debit Note and Credit Note: Key Difference & Similarities

How Long Does It Take For Ledger Balance To Become Available Balance?

It may take a maximum of 20-24 hours for the ledger balance to become available if there is no holiday from the bank since the ledger balance is computed at the end of the business hour and updated.

So the ledger balance will be the opening balance of your particular bank account the next morning, and for the whole day until again the ledger balance is not computed at the last bank working hour.

Why Is My Ledger Balance Negative?

In the case of a salary account, your ledger balance may be negative if you change jobs, and now there is no fund credited in your salary account. Suppose you are not maintaining the minimum balance required in your account.

As a result, your ledger balance will be displayed as negative because the bank will cut the charges for the non-maintenance of the minimum fund to your salary account.

The ledger balance is often called the current balance. However, it may be different from the available balance in any particular bank account. On the other hand, the available balance is the exact balance available in your bank account for withdrawing.


10 Best Virtual Debit Cards In India

Account Payee Cheque

What is Bearer Cheque?

What is Cheque & Different Types of Cheque