What is Account Balance and what is its significance?

Account Balance may refer to anything of the three below

In accounting, the residual amount of money in the general ledger is the account balance. Under this agreement, debits and credits are considered. Usually, the net value remaining after deduction credits from debits, the net account balance is obtained.
In banking, the current cash remaining in a checking, savings, or other investment accounts is the account balance.
In business, the net amount of remaining money payable by a payer to the payee is the account balance.

Uses in Accounting

In accounting, the easiest way to get the account balance is by considering the trial balance report at the end of the accounting period. The trial balance lists all ending accounts only the balance of which are non-zero.

Account balance shows which account is having the least activity and thereby merge them to another more active account.

To get the account balance, total liabilities are subtracted from net assets. In this sense, the account balance is also called net worth. Net worth shows the current value of positive funds in the case of checking and brokerage accounts.

Many businesses and individuals consider all expenses as credits that should be subtracted from liabilities. Account balance may show money owed to any third party, such as credit card bills. In the case of investments, the account balance may go up and down due to market conditions.

Points to Note

Account Balance is the net balance remaining in an account.
Account Balance shows which account is having the least activity.

Probir Banerjee

Updated on: 27-Jul-2021

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