What is an account balance?
An account balance is the amount of money in a financial repository, such as a savings or checking account, at a given time. The account balance is always the net amount after taking into account all debits and credits. An account balance less than zero represents a net debt, for example in the event of an overdraft on a current account.
Key points to remember
- An account balance represents the funds available, or the value of the current account, of a particular financial account, such as a current, savings or investment account.
- Financial institutions make available the current value of account balances on paper statements as well as online resources.
- The account balances of investments with risky assets can change significantly over the course of the day.
- A negative account balance indicates net debt.
Understanding account balances
An account balance shows the total assets of an individual minus the total liabilities. Sometimes this can be thought of as an individual’s net worth or total wealth because it subtracts debts or obligations from positive amounts. For specific accounts in a financial institution, such as a checking account or a brokerage account, the account balance will reflect the current amount of funds or the value of that account. For investments or other risky assets, the account balance will tend to change over time as the prices of the securities rise and fall in the market.
An account balance can also refer to the total amount owed to a third party, such as a credit card company, utility company, mortgage banker, or other type of lender or creditor. For example, a person may have made various purchases of $ 100, $ 50 and $ 25 on their credit card and have returned another item at a cost of $ 10. The account balance includes the purchases he made, which total $ 175, but also the item he returned for $ 10. The net amount of debits and credits is $ 165, or $ 175 minus $ 10, and this amount is the account balance.
Find your account balances
In a bank, the account balance is the amount of money an individual has in their current or savings account. The account balance is the net amount available to the person after all deposits and credits have been balanced with any charges or debits. Sometimes an account balance does not reflect the most accurate representation of an individual’s available funds, due to pending transactions or unprocessed checks.
For example, if a starting current account balance is $ 500 and the account holder has received a check for $ 1,500 and has also issued a check or scheduled an automatic payment of $ 750, their account balance may display immediately $ 2,000, depending on the bank. However, the actual account balance is $ 1,250. It is important to keep track of account balances by recording each credit or debit to ensure the most accurate picture of the account.
Many other financial accounts also have an account balance. Everything from a utility bill to a mortgage account must have an account balance to show an individual consumer their account balance. For financial accounts that have recurring bills, such as a water bill, the account balance usually indicates the amount owed.
Account balance and available credit
For credit cards, account balances are the total amount of debt owed at the start of the statement date. The credit card account balance also includes any debt carried over from previous months, which may have accrued interest expense. Available credit is the term used next to the account balance to indicate how much of the line of credit the account holder has left to spend.
For some bank accounts, deposits may not be cleared in whole or in part immediately and may take up to a few business days to appear in your account. In such situations, the bank will usually tell you the current available balance as well as the amount unavailable pending compensation.