Business, Legal & Accounting Glossary
Account balance is a net figure that refers to the dollar amount of credits and debits at the time the reporting period ends.
The term account balance is frequently used to describe a personal bank account balance, as well as other financial accounts. When it comes to banks, an account balance is simply an amount of money remaining on one’s bank account. Such an account balance may describe various personal accounts, such as savings, checking, and money market accounts. An account balance may likewise refer to an individual 401k account, also known as an accrued benefit. However, the term account balance does not only pertain to assets but liabilities as well. Thus, a credit card account balance is an outstanding account balance owed to a credit card company.
An account balance is the difference between the debits and credits posted to the account during the current accounting period plus the beginning balance. Not all accounts maintain balances from one accounting period to the next. Temporary accounts are closed at the end of each accounting cycle to permanent accounts, which carry the balances on to the next accounting period.
All accounts have either a debit or credit balance. Keep in mind that this does not mean a positive or negative balance. Instead, a debit refers to entries in a t-account on the left side while a credit is an entry on the right side.
Asset accounts have debit balances while liability and equity accounts have credit balances. There are a few exceptions to this rule, however. Contra accounts have a balance opposite from their classification. In other words, a contra asset account actually has a credit balance and a contra equity account has a debit balance. These contra accounts reduce their associated category level.
Account balances are calculated by starting with the beginning balance. The debits are totalled, the credits are totalled, and all three are combined together. This is the ending account balance.
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This glossary post was last updated: 28th December, 2021 | 0 Views.