What is a Ledger Balance? Example, Importance, 11 Facts

At the end of each business day, a bank computes the ledger balance, which includes all debits and credits. It is the beginning balance of the bank account the following morning, which does not change throughout the day.This article will explain how the ledger balance works, its significance, and other pertinent information. 

What is a Ledger Balance?

At the end of each business day, a bank computes the ledger balance, including all withdrawals and deposits, to determine the total amount of money in an account. The ledger balance represents the bank account’s opening balance the following morning and remains constant throughout the day.

What is a Ledger Balance?


Ledger balance is distinct from available balance and is sometimes referred to as current balance. If you log in to your online banking account, you can view both your current balance and your available balance, which represents the total amount at any point during the day.

In banking and accounting, the ledger balance is used to reconcile the book balance.

Deeper definition

The ledger balance represents the total amount of funds accessible to the customer. It includes all checks and deposits that have not yet been authorized for use.

The difference between the ledger balance and the available balance is ambiguous. Many individuals mistakenly believe that their accessible balance and their ledger balance are identical.

Available balances are typically divided into two categories:

  • A journal balance adjusted for daily transactions, or the ending balance.
  • A ledger balance that excludes pending deposits and credits that have been withheld or not yet posted.

Because the ledger balance is the beginning balance and not the ending balance, as most accessible balances are computed, it is incorrect to assume that they are identical. Numerous online and mobile banking services may not always display the most up-to-date information in real time.

In addition, bank statements are unreliable on their own. The bank statement balance is derived from the ledger balance at the time of issuance. However, any events that have transpired since the release of the statement will impact the bottom line.

It is prudent to record your income and expenses so that you are always aware of your ledger balance. Failure to do so may result in an expensive and potentially humiliating overdraft.

How can Ledger Balance be Calculated at the End of the Day?

A ledger balance can be calculated by adding the closing balances of each business day for a particular month and dividing by the number of business days in that month.

A day’s closing balance reflects both posted and unposted transactions. In other words, it may be determined by adding all of the day’s credits to the opening balance and subtracting all of the day’s debits.

How Ledger Balances Works

At the end of each business day, once all transactions have been completed and authorized, the ledger balance is updated.

Banks compute this total after reporting all transactions, including deposits, interest revenue, wire transfers in both directions, cleared checks, cleared credit card or debit transactions, and any error corrections. It displays the account balance at the start of the following business day.

What is a Ledger Balance?

There may be delays in processing outstanding deposits due to the fact that the bank must first receive funds from the financial institution of the individual or business that issued the check, wire transfer, or other payment method. After funds have been transferred, they become accessible to the account holder.

The bank statement contains only the ledger balance as of a particular date. After this date, deposits made or checks written are not reflected on the statement. The ledger balance can be used to determine if a specified minimum balance requirement is being met.

Moreover, it appears on bank account receipts. The ledger balance and available balance of the bank account are not identical.

Ledger balance example

If you begin the week with $1,000 in your checking account and receive $2,000 on the 15th of the month, your day-to-day ledger balance will be $1,000 on the 15th of the month.

Depending on how quickly the check clears following the payment, $2,000 may appear in your available balance, but your ledger balance will not reflect a $3,000 balance until at least Tuesday.

Why ledger balances are important

Remember that the daily ledger balance is the beginning balance, not the ending balance. Typically, the end balance and the available balance are determined at the end of each day.

When using mobile or online banking, the most recent information may not be displayed. Some banks display both the current and available balances, allowing customers to determine the amount of available funds.

Similarly, bank statements should not be relied upon. As previously stated, statement balances are derived from the ledger balance as of the statement date. Remember that any transactions, including deposits, withdrawals, and checks, made after the statement date will reduce your available balance.

To ensure that you are always working with the most recent balance, it is necessary to keep accurate records. You may choose to keep your own ledger with a running total of your account balance, including all account transactions.

Ledger Balance vs. Available Balance

The primary difference between a ledger balance and an accessible balance is that the latter represents unprocessed financial transactions. Available balances and ledger balances may sometimes be identical; however, they are distinct indicators of immediately accessible cash.

These characteristics and distinctions distinguish these two figures:

Available Balance

  • The current balance of a personal checking account is displayed.
  • If you withdraw or deposit funds using a debit card or cash a check, the exchange rate will fluctuate throughout the day.
  • Indicates the amount of available funds.

Ledger Balance

  • Represents the beginning-of-day balance after accounting for transactions from the previous business day.
  • Displays the total balance in your bank account without reflecting any pending transactions.
  • Exists a more suitable metric for long-term financial planning?

Again, the amount that is updated at the start of each business day is your ledger balance. The ledger balance reflects the total amount of money in your account, even if not all of it is immediately accessible. For instance, your bank might still need to clear payments or checks.

The available balance is the difference between the ledger balance and any daily transactions. Your available balance fluctuates as you use your checking account throughout the day and represents the total amount of cash that is available for withdrawal.

Ledger Balance vs. Available Balance – An Example

Review your ATM withdrawal slip the next time you conduct a transaction to better comprehend the difference between your ledger balance and your available funds.

It will never indicate that your available balance and ledger balance are identical. Suppose you withdrew $1,300 from your account when your previous ledger balances totaled $14,495.

Following the withdrawal, your available balance will decrease to $13,195, but your ledger balance will remain unchanged at $14,495. This is because you have an upcoming transaction. Clearly, the difference in balances would be considerably larger if more transactions had occurred on the same day.

Why Understanding the Difference Is Important

Due to the fact that the ledger balance is calculated only once per day, it is possible for it to exceed the available cash. This may result in an unplanned overdraft, but this is not always the case; some banks will refund the transaction rather than allow their customers to incur an unplanned overdraft.

However, since most people find trying to pay for goods or services and having their transaction declined to be an unpleasant and even humiliating experience, it is best to avoid the situation altogether.

Financial institutions do not transmit funds immediately following a transaction due to the time required for deposits, checks, and wire transfers to reach the recipient. A business that receives a large number of checks would likely have to wait a few days before noticing any changes to its account balance.

It is essential to understand that the ledger balance does not necessarily correspond to the quantity of assets you actually possess. Both are not the available balance, but the latter accurately reflects the amount of money you have at any given time.

Keeping Track of Your Balance

Due to the fact that both your ledger and available balance “lag” behind the actual state of your bank account, it may be prudent to use an app or a physical notepad to keep track of all your expenditures.

You will still need to check your ledger balance and available balance periodically to monitor any third-party transactions on your account, but you will avoid accidentally overdrafting your account and incurring overdraft fees.

Checking your account balance at any time should not be too difficult with the help of modern banking applications. Simply record your opening balance and subtract your liabilities. The remaining balance is the remaining balance.

What is a Ledger Balance?

Ledger Balance vs. Memo Balance

  1. The general ledger balance includes all legally documented financial transactions, such as cleared checks, completed debit card transactions, etc.
  2. In contrast, the memo balance reflects the account balance, taking into account all transactions posted to the bank account of the account holder.

The difference between the Ledger Statment and Balance Statement

Balance of the Ledger is a legitimate ledger (sum of payments and charges). The Statement Balance is the sum of all charges billed to the customer and all payments received against those charges.

In terms of the reasons why the balances may differ, the two most significant differences between the two reports/statements are:

  1. The date recorded in Therabill for payments.
  2. The session’s position (Open vs Closed).

Client Ledger Balance/Statement

The entry in the journal resembles a checkbook. The entries (charges and payments) are arranged chronologically. Regardless of the session state, all charges will be displayed.

Payments – The date shown is the Post Date Fees – The date shown is the Date of Service

Statement Balances (Client Balance Statement)

The client balance statement lists the Dates of Service (charges) that are owed by the client, as well as the outstanding balance for those sessions.

Each line represents a procedure/service and displays the sum of all payments and adjustments associated with that procedure/service. The amount due is equal to the fee minus payments and adjustments. Due to the consolidation of all payments and adjustments for each charge, the Date of Service is the effective date of the payments.

  1. Fees – The date shown is the Service Date
  2. Payment – The payment applies to the specified Date of Service.

An open session indicates that an insurance determination is pending. A closed session indicates that the remaining balance is the customer’s responsibility.

What statement should I use?

Each assertion is useful. Since the Client Balance Statement includes sessions for which insurance is still pending, it is ideal for billing clients. If your client requires a breakdown of costs, payments, and dates, the Ledger Statement is ideal. Ensure that your clients are aware that the balance displayed on this invoice does not necessarily reflect the amount they owe.

Why have two different types of balances?

Having both balances is useful for reconciling and identifying inconsistencies in patient accounts, especially if you use the Client Balance Statement to bill your client.

It allows you to identify differences between the client’s ledger and the statement balance you’re providing. If there is a difference, you should reconcile the account to determine why the two balances are different.

What is a Ledger Balance?

Why are the client balances different?

There are four major reasons why the accounts do not balance. The following justifications are provided.

TIME-SAVING TIP: The first two causes may be attributable to data entry mistakes made by your clinic, which are easily identifiable in the ledger found under Schedule > Ledger.

Reason 1: Payments for services that were not billed to the customer.

Therabill enables the creation of session classes that indicate a session is not billable to a customer. These sessions will not be reflected on a client’s account balance statement. Therefore, the payments will not be reflected on the client’s account statement.

These sessions will not be recorded on the ledger of a client. If payments were applied to the session, however, they will be reflected in the client ledger.

You can locate payments applicable to these sessions in your ledger. These payments will appear in red with the phrase “Charge not applicable to customer” in your ledger.

Reason 2: The service was terminated following the application of payment.

If you apply a payment to a service/CPT and then remove it, the charge amount and payment amount will no longer appear on the client’s statement. Regardless, the payment will be recorded in the ledger. Always remove or reassign payments associated with a service or CPT before deleting the service line.

You can locate payments that were applied to deleted charges in your ledger. These payments will appear with red ink in your ledger, indicating that the charge has been removed.

Reason 3: The openness or exclusivity of the session or fee.

This is likely the primary reason for the difference between the two balances. The client balance statement may exploit the open/closed nature of the session. That is, the remaining balance does not reflect fees for sessions covered by insurance. The journal entry displays all expenses and payments, regardless of session.

Can anybody Withdraw Money from the Ledger Balance?

No, one may only take readily available items. Certain products, such as debit cards used as “charge cards,” are not instantly reflected; therefore, one may only withdraw and spend the funds currently in their bank account.

What is a Ledger Balance?

For example, A’s ledger balance is $5,000, but only $3,000 is available. This indicates that A may withdraw an amount less than or equal to $3,000.

Effect of the Financial Planning

Always check your account balance before making a withdrawal. Since the ledger balance is not regularly updated, it cannot be used to make decisions. In contrast, the available balance is frequently updated and includes real-time transaction details.


The ledger balance is the beginning balance recorded in the bank account at the beginning of each business day; it does not fluctuate throughout the day. Memo balance differs from the customer’s available balance.

The bank computes it at the end of each business day, taking into account debit and credit transactions. Account holders must always maintain accurate records, as neither bank statements nor internet banking reflect any changes.

These accounts are each assigned a unique account number. Among others, these accounts are classified as liabilities, assets, revenues, equity, and expenses. Others have negative balances.

These accounts are categorized in numerous ways. The liability, equity, and income account typically has a credit balance, while the asset and expense account typically has a debit balance.


The available balance is the total amount that an account holder can withdraw from their bank account. You cannot access your Ledger Balance at all times. You can access the available balance at any point in time. When you withdraw money from your account, it will get reduced from the ledger balance immediately.
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.
Can I spend my ledger balance? No, you can only spend your available balance, which can be the same as your ledger balance, but it can also be higher or lower, depending on the transactions made that day.
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.
5/5 - (1 vote)
Pat Moriarty
Follow me

Leave a Comment