Account Balance

An account balance is the total amount of money in a bank account or general ledger account. Accountants or banks usually calculate this by taking the sum of all deposits and subtracting all withdrawals. Note that this is sometimes treated differently from the account’s running balance, which is a continuously updated tally of all transactions that have occurred in an account during the current statement period.

What Is Account Balance Accounting?

It refers to the practice of tracking account balances over time. Accountants can do this for individual accounts or for groups of accounts, such as all the accounts in a company’s bookkeeping system. The balance is usually either expressed as a positive or negative. A positive balance implies an adequate amount of cash compared to current expenses. In contrast, a negative balance is a symptom of overspending, low revenue, or both.

By keeping track of account balances, businesses can better understand their financial positions. Here are some additional benefits and uses:

Detecting unauthorized transactions
Determining how much credit the business can extend
Forecasting future cash flow needs
Reconciling accounts
Identifying errors in bookkeeping entries

What Are Some Types of General Ledger Accounts With Balances?

All general ledger accounts carry a balance. Sometimes, these balances represent hard numbers or transactions. Other times, they represent estimates, such as for bad debt or asset depreciation. Consider the following examples:

Cash
Accounts receivable
Inventory
Prepaid expenses
Unearned revenue
Wages payable
Sales tax payable

How Can You Complete an Account Balance Check?

When you want to know the current balance in a bank account, you can use mobile apps or websites to log in. The bank’s system will display the current total balance and you can review monthly statements. You might also have the option to request a statement for a specialized period from your bank, such as quarterly.

When it comes to an accounts payable or accounts receivable balance sheet, accountants do a bit more work. They need to go through the individual transactions and calculate the balance for each one. Accountants can do this manually or they can use software to automate the process.

No matter how you calculate it, the balance is always a snapshot in time of the money in an account. This can change weekly or even hourly. Accountants must keep this in mind when trying to make financial decisions based on that balance.

Why Is Balance Forecasting So Important?

Balance sheet forecasting is a technique used to predict future account balances. Financial professionals can use historical data or trends in the data. Forecasting can help businesses plan for upcoming expenses and make sure they have enough money in their accounts to meet these obligations.

The finance team does more than just manage the current financial affairs of a business. It must also be in a good position to make good predictions of the company’s cash position, which comes back to the balances in its accounts. Without accurate account balances, businesses would be flying blind when it comes to their finances. Forecasting helps businesses accomplish the following:

Avoid overdraft fees
Plan for upcoming expenses
Maintain good relationships with creditors
Reduce operations disruptions due to unpaid bills
Ensure payments-related compliance, such as for wages and taxes

How Can Gaviti Assist With Boosting Your Account Balance?

Our team has worked hard to create an accounts receivable tool that automates tedious processes and boosts cash flow. This, in turn, has a direct and positive impact on your bank balance. It also helps you reconcile your general ledger accounts and reduce the need for bad debt write-offs. Test our software to see what it can do for your business.