Account balance refers to the net figure that represents the amount of debits and credits at the end of a periodic cycle. This term is generally used for both personal and financial bank account balances. In the simplest terms, Account Balance refers to the remaining money in a customer’s bank account.
This term does not only represents assets but liabilities as well. For instance, the account balance of a credit card is the outstanding balance that a customer owes to the bank or the credit card company. This will be shown as a positive figure in your credit card statement.
Simplifying the Concept
If the Account Balances is positive, it indicates that there are funds available in the owner’s account (this does not apply to credit card statements). On the other hand, if the Account Balance is negative, it means that the account holder owes money to someone.
Account Balances are essential in the field of banking because they are a way of determining whether the account holder has money for his/her expenses or to know that how much money he/she owes to someone else.
Let’s take a simple example!
Imagine you have made credit purchases of INR 1000, INR 500 and INR 250.
You returned an item of INR 100.
So the net of your credits and debits would be INR (1000 + 500 + 250 - 100) i.e. INR 1650. INR 1650 is your account balance.
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Almost everyone is aware of what an account balance is, especially someone who has a bank account and does transactions regularly. Knowledge of credits and debits will be useful for any person to ensure they are aware of the transactions that take place on their account. The article was helpful in offering details on the calculations of account balance too.
A very simple topic made all the more easy by giving examples and formula. Account balance can be calculated only annually or monthly too? Account balance is the amount of debit and credit and the sheet in which it is calculated is called the balance sheet.