How to Convert Ledger Balance to Available Balance?

What are Ledger Balance and Available Balance?

Ledger Balance:

It is like the starting amount in your bank account for each day. It will not change throughout the day, even if you do transactions. For example, if you start with $100 in your account, it stays $100 for the whole day.

Available Balance:

Shows how much money you can use right away. It considers cleared deposits and subtracts withdrawals. This balance helps you know how much you can spend or withdraw immediately. It is different from the Current Balance, which includes pending transactions. Credit cards, it is like your spending within its limit.

How to Convert Ledger Balance to Available Balance?

To Convert the Ledger Balance to the Available Balance, follow these steps:

Transactions Pending Identification:

• Look at your recent transactions to find any payments or purchases that have not been fully processed by the bank.

Consider Holds:

• Take into account any temporary holds on your account, like those from a hotel or gas station.

Subtract Pending and Holds:

• Subtract the total amount of pending transactions and holds from your ledger balance.

Compare Ledger and Available Balance:

• Remember, your ledger balance is what you start with each day, while your available balance is the real-time amount you can spend.

How to Calculate Ledger Balance?

Note the Opening Balance:

• Write down how much money you have in your account at the start of the day. This is your starting point.

Add All Credits:

• Note down any money you have received or deposited into your account during the day. This could be from customers paying you or deposits you made.

Subtract All Debits:

• Take away any money you have spent or withdrawn from your account during the day. This includes purchases you made or bills you have paid.

Final Calculation:

• Once you have added up all the money you have received and subtracted all the money you have spent, you will have your ledger balance. This is how much money you have in your account at that moment.

Example:

• Opening Balance: $1,000
• Credits (Money Received): $500
• Debits (Money Spent): $300

To calculate the ledger balance:

• Add the Credits: $1,000 (Opening Balance) + $500 (Credits) = $1,500
• Subtract the Debits: $1,500 (Total) - $300 (Debits) = $1,200

Ledger Balance: $1,200