Date created: Nov 19, 2020 • Last updated: Nov 24, 2020
What is Account Balance?
Account Balance represents the difference between debits and credits in an account on a company’s general ledger. If debits are larger than credits, the account has a net debit Account Balance. If Credits are larger than debits, the account has a net credit Account Balance.Alternate names: Balance, General Ledger Account Balance
How to calculate
In a single day, a store generates a total of $10,000 in new sales (credits), and issues $1,500 in refunds (debits). The store’s revenue account has a net credit balance for the day of $8,500.
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More about this metric
A general ledger records, stores, and summarizes the transactions that take place in a company's accounts. Generally, accounts include assets, liabilities, owner's equity, revenue, and expenses.
Transactions taking place in business accounts are recorded in a general ledger, with an equal debit and credit amount which always keeps the general ledger balanced. This is the function of a double entry accounting system and as a result the following equations will always hold true:
Assets = Liabilities + Owners Equity
Net Income = Income - Expenses
Tracking Account Balance helps businesses prepare their financial statements such as the income statement and the balance sheet. Additionally, historical records in a general ledger summarize past transactions and can help file taxes, comply with government regulation, and analyze business trends.