Ledger Balance Explained

A ledger balance is one of those terms that sounds complicated, but is actually pretty straightforward. This is just an accounting term for the current balance in an account.

In most cases, the ledger balance will be the same as the balance at the opening of business in the morning. This number will be the balance from the previous night, plus any overnight deposits and minus any overnight withdrawals or transactions. It will include these things whether or not the transaction has actually been completed. In the case of an incomplete transaction, this will normally show as pending.

But what else do you need to know about your ledger balance? Here, we’ll discuss some of the basics, and give an example of how a ledger balance works in practice. Let’s get started!

Ledger Balance – What Is It?

So, what is a ledger balance, and what does this mean for you? Broadly speaking, a ledger balance represents the sum total of available funds in your account. This number is calculated in a straightforward fashion. First, your bank takes your active balance at the close of business the night before. Then, they add any deposits that have cleared. Next, they subtract any money you’ve spent, whether through a transfer or through a check or debit card transaction. The end result is the amount of money you have available to spend at the opening of business.

This can lead to some confusion. Because a ledger balance is measured first thing in the morning, it’s not up to date. If you have transactions throughout the day, those are not going to be counted in your ledger balance. They’ll eventually be taken into account the following morning, but in the mean time, your ledger balance isn’t going to take them into account. Along the same lines, you may have had an overnight deposit, but the funds have not yet cleared for some reason. In this case, the deposit will reflect in your ledger balance, even though the money is not actually available. Thanks to electronic banking and modern technology, this is becoming less and less common.

Thankfully, most banks will allow you to view your available balance. This is up to date information that includes all of your transactions throughout the day. Not only that, but an available balance will not include any deposits that have not yet cleared. This means that an available balance is a far more accurate measure of how much money you can actually spend.

At the same time, you need to be careful. Many online banking apps will only show you your ledger balance, not your available balance. This can cause you to make mistakes, and spend money that you don’t actually have available. Thankfully, it’s easy to test. Check your balance on your phone at 9 in the morning, before you’ve spent anything. At noon, make a small purchase with your debit card. Then, wait a few hours, and check your balance again. If it’s the same as your balance in the morning, you’re only seeing your ledger balance. If it’s updated to reflect the purchase, you’re seeing your available balance.

Along the same lines, it’s unwise to rely on your bank statement to keep track of your balance. Your bank statement is only issued at specific time periods, and it relies on data from your ledger balance at the time of the statement. In other words, it’s not going to reflect any credits or debits from after the statement was issued.

Ledger Balance Example

It’s Monday morning, and you have $1,000 in your checking account. You have a $1,000 check coming on Tuesday. On your way to work, you stop and buy $50 of gas with your debit card. When you wake up on Tuesday morning, your account will show a ledger balance of $950.

Depending on your bank, the $1,000 check may show as pending. If your bank is particularly fast, the check may clear early. In that case, your balance may update during the day to show $1,950 hours. If the check clears overnight, your balance will not read $1,950 until Wednesday morning.


As you can see, the concept of a ledger balance is pretty straightforward. It’s the amount of money available in an account first thing in the morning, including overnight transactions. Sometimes, it may be updated throughout the day, in which case it’s actually your available balance. Either way, it’s the number you see when you check your account to see your balance. That’s all there is to it!