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What Does Ledger Balance Mean?

Andrew Secker, Private Banker, First Republic Bank
December 21, 2021

  • A ledger balance is the checking account balance at the beginning of a given day. 
  • Ledger balances are calculated at the end of each business day after all credits, withdrawals and interest from a given day’s activity have been factored in.
  • A ledger balance differs from an available balance.

As you spend money and make payments, you’re likely to notice the record of each transaction populating your online bank account. This real-time balance is known as the available balance, which is different from a ledger balance. Some institutions refer to ledger balance as a current balance. 

Your ledger balance, while seemingly similar to the available balance, is the amount shown at the beginning of each day, which will not change until the following business day. Understanding the ledger balance definition, how it relates to your personal checking accounts and how to differentiate from your available balance is important. With this knowledge, you can better understand how your personal checking account works and add to your overall financial planning toolkit.

What’s a ledger balance?

What does ledger balance mean? The ledger balance, or current balance, is the opening amount of money in a given checking account each morning, and remains the same throughout the day. 

A bank will update the ledger balance on your personal checking account at the end of the business day, once all of your transactions are approved and processed (this includes withdrawals and deposits, cleared checks and other activity, such as incoming and outgoing wire transfers, interest income, bill payment or error corrections). Once calculated, your checking account will show a new balance at the start of the next business day.

You should know how to distinguish between the two key views on your personal checking account: ledger balance vs. available balance.

Ledger balance vs. available balance

The main difference between a ledger balance and an available balance is the available balance shows financial transactions that haven’t yet been processed. Available balances and ledger balances can be the same at times; however, they’re different indicators for funds you can access immediately. 

These are the key characteristics and differences between these two figures:

Available Balance

Ledger Balance

  • Reflects the real-time balance of a personal checking account

  • Will change during the day as you withdraw or deposit money, such as use a debit card or cash a check

  • Reflects how much money is available immediately

  • Reflects the balance at the start of the day after posted transactions from the business day before have been accounted for

  • Shows the total amount of money in your bank account without reflecting pending transactions

  • Is a better metric to use for long-term financial planning

Again, your ledger balance is the balance updated at the start of a business day. The ledger balance shows the total amount of money in your account, but the total amount of funds may not be ready to use. For instance, checks or deposits may still need to be cleared by your bank.

The available balance is the ledger balance minus any transactions made throughout the day. Your available balance will change during the day as you use your checking account and thus is the aggregate of funds available to withdraw.

Knowing both the ledger balance definition and available balance definition — and the differences between how they work — is important when planning your finances and payments.

How a ledger balance works

A ledger balance will update only after transactions have been processed by the bank at the end of the business day and then show you a new opening balance the next day. A ledger balance will not provide real-time updates during the day.

Federal regulations allow banks to place a hold for a set period of time on any deposited funds before they are available for use. Money on hold, but not yet authorized for use, is known as a pending deposit. Once the bank verifies receiving the funds from the holder who issued the check or other form of payment, they’ll add the funds to your available balance. Pending transactions could include withdrawals, wire transfers or debit card activity.

Bank statement balances are taken from ledger balances when the statement is initially issued. To account for an accurate total ledger balance, you should keep track of any transactions received after you receive the bank statement.

Ledger balance example

Seeing an example of a ledger balance can help you understand the ledger balance definition.

For instance, perhaps you begin your week with an opening checking account balance of $500, then get a paycheck deposit for $1,000 and make a debit of $200 on your bank card. Regardless of these additional transactions, your ledger balance will be $500 throughout the entire day on Monday. This is because the check hasn’t yet cleared, the debit transaction is still pending and your ledger balance is based on the start of the business day, not the activity throughout.

Understanding your ledger balance is necessary when planning your finances and payments.

Why ledger balances are important

Knowing your ledger balance is important for many personal finance reasons, such as avoiding overdraft fees, bounced checks, and insufficient funds for automatic debits, such as bill payments. Additionally, if you need to keep a minimum balance in your bank account, knowing your ledger balance is a crucial part of making sure you’re maintaining this number.

Regularly checking your ledger balance plays a role in financial planning. This includes budgeting as well as knowing when you can withdraw funds for both big and small purchases, since funds are not truly accessible until they are reflected in your ledger balance (not only in your available balance).

Regularly checking your ledger balance to stay up to date on funds is essential if you want to know the most about your financial situation.

Take control of your money management

Knowing your ledger balance is an important part of banking with confidence, as is working with a trusted banking partner. A representative from First Republic’s Personal Banking online banking services can help you effectively manage your checking account so you can be as up to date as possible on your funds.

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