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    What is the difference between ledger balance and available balance?

    The ledger balance and available balance are terms used by a bank for the cash position of a checking account. The ledger balance is the balance available as of the beginning of the day.

    The available balance may be defined in two different ways; they are:

    • The ledger balance, plus or minus any subsequent activity during the day; essentially, it is the ending balance at any point in time during the day; or
    • The ledger balance, minus any checks deposited but not yet made available for the use of the account holder, as well as other credits that have not yet been posted to the account.

    The latter definition is more commonly used. Thus, in most situations, the primary difference between the ledger balance and available balance is checks that the company or individual has deposited in his account, but which the bank has not yet made available for use. The reason for this delay is that the bank must first be paid by the bank of the entity who issued the check. Once the cash has been transferred, the cash will be made available to the account holder.

    Banks may delay the availability of this cash to the account holder, thereby earning interest on the withheld cash.

    Related Topics

    Bank reconciliation procedure 
    What is a bank balance? 
    What is a book balance? 
    What is a deposit in transit? 
    What is not sufficient funds? 

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    Reader Comments (1)

    That's very informative and precise. Thank you!

    September 4, 2012 | Unregistered CommenterManan Saxena
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