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Ledger Balance: What it is, how it works, and tips for beginners ⚖️
Ledger balance meaning:
The ledger balance is the total balance in a bank account at the end of the business day. It Includes all cleared deposits and all cleared withdrawals. It doesn’t include any pending transactions that haven’t been fully processed yet.
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How a ledger balance works
A ledger balance works by showing the total amount in your bank account at the end of each business day. The bank adds up all the deposits, withdrawals, and transfers that have fully cleared. This total, or ledger balance, then becomes the starting amount for the next day. This balance doesn’t include any pending transactions that haven’t gone through yet, so it reflects only the confirmed, available amount.
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How a ledger balance works
To calculate a ledger balance, use this simple formula:
Ledger Balance = Opening Balance + Credits - Debits
Here’s a breakdown:
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Opening balance: The starting amount in your account at the beginning of the day.
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Credits: Money coming into the account, like deposits or refunds, which increase the balance.
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Debits: Money going out of the account, such as withdrawals or transfers, which reduce the balance.
This calculation gives you a clear view of your account’s financial status at the end of the day.