The amount of money in an account with a financial institution. This can be on a savings of checking account.
It also applies to the amount owed on a bill such as a credit card or utility bill.
This factors all debits and credits during the period. Account balances are usually updated in the digital age at the start of each business day.
Many use the Internet to log onto their accounts to check their balance.
Banks maintain account balances by recording all incoming and outgoing transactions. Deposits and withdrawals are tracked to provide the updates.
Brokerage firms will follow something similar. There is one added difference. As the price of securities move based upon market activity, this has to be reflected in the account. There are two balances, securities and cash that are constantly changing due to activity.
Ledgers
All of this is tied to ledgers. This is the basis of the financial system. Accounting is a vital part of everything from the money supply to the monetary system being used.
Assets and liabilities are crucial. These continually have to be updated. Markets and businesses are constant motion, with things constantly in flux.
Accounting allows for a snapshot at a place in time to be taken, allowing investors, borrowers, lenders, and other participants to make decisions.
Account Balance vs. Available Credit
When dealing with credit, the institution will determine how much is granted to the individual. This is based upon credit history and score.
Available credit is the total less the account balance. The account balance, in this situation is the amount of credit used up.
More can be added to the account balance as long as it is below the credit limit. One that level is met, no more purchases can be processed unless the limit is raised or the debt is paid down.
Opening vs Closing Balance
An account can have an opening and closing balance.
The opening balance is the amount of money at the start of the period. This is before any transactions are processed. The opening balance will mirror the closing balance of the previous period.
A closing balance is the result of processing all transactions through the period. The opening balance, adjusted for all credits and debits equates to the closing balance.