Account Balance

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


ƒ Sum(Account Credits - Account Debits)
ƒ Sum(Account Debits - Account Credits)

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.

Account Balance

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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.

Recommended resources related to Account Balance

How to calculate credits and debits in a general ledger.