Account Balance

Refers to the amount of money in a financial account, such as a savings or checking account

Author: Adin Lykken
Adin Lykken
Adin Lykken
Consulting | Private Equity

Currently, Adin is an associate at Berkshire Partners, an $16B middle-market private equity fund. Prior to joining Berkshire Partners, Adin worked for just over three years at The Boston Consulting Group as an associate and consultant and previously interned for the Federal Reserve Board and the U.S. Senate.

Adin graduated from Yale University, Magna Cum Claude, with a Bachelor of Arts Degree in Economics.

Reviewed By: David Bickerton
David Bickerton
David Bickerton
Asset Management | Financial Analysis

Previously a Portfolio Manager for MDH Investment Management, David has been with the firm for nearly a decade, serving as President since 2015. He has extensive experience in wealth management, investments and portfolio management.

David holds a BS from Miami University in Finance.

Last Updated:November 14, 2023

What is an Account Balance?

The amount of money in a financial account, such as a savings or checking account, is known as an account balance. The balance is the difference between the total number of debits and credits in an account during a financial period.

It shows how much money would be left after all debts are paid-off and whether enough liquidity to meet debt obligations is available.

To better understand what "balance" means, one can think of "balance" as the net value of assets and debts at the end of a financial period.

Key Takeaways

  • Account balance equals net profit calculated by total assets minus liabilities. It is the total money in the account, including transaction checks and transactions that are not cleared, while the available balance is the sum of money in the account that one can use for purchases and withdrawals.
  • Balance categorizes into credit balance, debit balance, and zeroed out.
  • In checking accounts and brokerage, the balance of the account reflects the present value of the funds.
  • There are two main types of balances checking and credit accounts.
  • A credit card's balance might be positive or negative, and it may fluctuate based on the transactions made with the card. 
  • Checking the balance does not accurately reflect the available amounts at any given time. One must compare the computed balance to the bank statement balance regularly.
  • Statement balance is the amount owed at the end of a billing cycle, while the current balance is the total amount of money owed on a credit card, including the balance from the last statement and new charges.
  • Checking the account regularly enables keeping track of finances and identifying problems.
  • Ways to check the bank balance include long online, using mobile apps, utilizing ATMs, calling the bank, and set-up notifications from the bank.

Account Balance Categories

It can be categorized into:

1. Debit balance

Debit is the total amount of money that flows into an account, while debit balance refers to the overdraft balance in your current account or the money you owe the bank. When the total of all debits is more than the total of all credits, the account shows a debit balance.

For example, suppose Tom starts a small business with $6,000. During the first week, he spends $2,000 purchasing equipment.

In other words, he starts with cash of $6,000, which would be in debt entry. Debit will be deducted by $2,000 so that the debit equals $4,000 while the credit equals $2,000. After recording this transaction, the account will have a debit balance of $4,000.

2. Credit balance

Credit refers to money flowing out of an account, whereas credit balance refers to the balance in your checking account or the amount the bank owes you. When the total number of credits exceeds the total number of debits, the account shows a credit balance.

For example, suppose Sara starts a small business with $8,000. During the first week, he spends $10,000 purchasing equipment.

In other words, Sara starts with cash of $8,000, which would be in debt entry, and $10,000 would be on the credit side.

The difference between the credit and debit sides is $ 2,000. This excess of credit side over the debit side is the credit balance of Sara's account, which is $ 2,000.

3. Zeroed out

If the total number of the debits and credits are the same, the balances are said to be "zeroed out."

For example, suppose Sara starts a small business with $15,000. During the first week, She spends $15,000 to purchase equipment. The difference between the credit and debit sides is $ 0, so the balance of Sara's account would be zero.

It is essential for margin accounts, retirement accounts, bank accounts, mortgages, and other repositories. It is also referred to as money owed by a third party, like a credit card company.

Recognizing Account Balances

It shows total assets minus total liabilities and is also called the total wealth or net worth because it doesn't include any debts or obligations.

For some accounts, including checking and brokerage, it reflects the present value of the funds. For some investments, such as security, the balance will fluctuate as the prices of securities change.

In financial institutions, recurring bills show the amount owed to a third party, such as a credit card or mortgage banker. In other words, the account balance on the credit card or third-party account reflects all transactions made up to the moment.

In a banking account, it refers to the amount of money currently available in the checking or savings account.

The checking balance reflects the net total of debits and checks that refund from the account, and the total deposits are added to the account. 

When there isn’t enough money to cover transactions and withdrawals, an overdraft occurs on a checking account. However, the bank allows transactions and classifies these transactions as any other loan (credit).

One can see balance as the net amount of money left after balancing credits with debts in the account. However, sometimes it fails to show the accurate available funds at an unexpected moment.

Types of Account Balances

There are two primary account balances: credit card and checking accounts.

1. Credit card

Credit cards provide a line of credit that can be used for purchases, debt transfers, and cash advances, with the requirement to repay the loan amount over time. 

When using a credit card, one must make the minimum payment on the debt each month by the due date. A credit card's balance might be positive or negative, and it can fluctuate from month to month based on the transactions made with the card.

Generally, owing money on a credit card can adversely affect a person's credit rating. Purchases, payments, and balance transfers contribute to a credit card account's overall balance.


A person has made purchases of $300, $60, and $30 and returned items costing $20. 

The account includes all purchases made, subtracting the cost of the returned item:

$300 + $60 + $30 - $20= $370

Therefore, The net of the debits and credits is $370, which is the account balance.

2. Checking account

Checking accounts are utilized for day-to-day expenditures. The account can be used for personal or commercial purposes. One can link a debit card to this account while making purchases, withdrawing, or depositing cash from an automated teller machine.

Checking accounts do not accrue interest but are excellent for daily transactions, making deposits, writing checks, and paying bills.  

Sometimes the balance of the checking account fails to show the accurate available funds at any time. Therefore, comparing the computed balance to the monthly bank statement balance is necessary.


If the starting balance is $1000, a check is received for $2,000, and a check is written for $500, the account balance may show $3,000 immediately. 

However, the actual value is $2,500. Remember to keep track of every credit and debit activity and compare the computed balance to the balance on the bank statement once a month.

Available Credit vs. Account Balance

"Available Balance" and "Current Balance" are generally the most misunderstood terminologies in the financial industry. They seem to be the same terminology in the finance sector but are entirely different terms.

1. Account balance

It includes all the money covering available funds, pending transactions, and checks.

2. Available balance

The available balance is the sum of money in the account that can be used for purchases and withdrawals. It does not consider any pending transactions and checks held from the account balance.

So, one cannot immediately use the money in the account without waiting for pending transactions to clear. 

Remember, using the available balance helps you assess how much money is available for different transactions. 

You will overdraw your account if you spend based on your account balance and use funds more than your available balance. In this case, the bank will cover your payment, and the borrower will pay interest (overdraft loan). 


Assume John’s available and account balances are $100 and $150, respectively. John purchases a Nike shoe on sale for $80 by using a debit card. A hold is placed on John’s account, and his available balance is $20. 

The check he wrote for $40 was cleared before the charge account by the bank. In this case, John's account will be overdrawn by $20 as he only has $20 available. 

John will be charged overdraft fees, and the bank will cover the remaining amount.

The account balance is always higher than the current balance because of some reasons, including but not limited to one possible reason.

The reason is that one recently deposited a check through an ATM or mobile deposit. Some banking institutions will not add the deposit to the available balance until they verify that the check is valid and that the issuing bank has received cash. 

Statement balance Vs. current balance

When it comes to paying monthly credit card bills, the cardholder may be concerned with determining how much he owes. However, two terms, "statement balance" and "current balance." may cause. 

The statement balance is the total of all charges and payments made throughout a billing cycle. On the other hand, the current balance gives a more realistic picture of how much a person owes on a credit card.

Both amounts will be displayed when the person logs in to the online account. The statement balance shows the person’s monthly credit card statement.

1. Statement balance

The statement balance is the amount a person owes at the end of a  billing cycle, typically lasting between 20 and 45 days. Consider it a monthly snapshot of the account. 

It is the sum of all purchases, fees, interest, and unpaid balances, less any payments or credits made since the last statement.

The person must pay the statement balance in full to let the account be reported to the credit bureaus to avoid paying interest. The person can also pay a minimum payment to avoid late fees.

2. Current balance

The current balance is the total amount of money owed on the credit card, including the balance from the last statement and any new charges. It varies with each usage of the card.  

However, pending purchases aren’t shown in the balance until posted. The balance is eliminated immediately after the transaction if the full payment is made.


Alia spent $1000 during a billing cycle and spent $100 after a billing cycle. Alia’s statement balance is $1000, while her current balance is $1100. So, Alia’s current balance is higher than the statement balance by $100.

If Alia makes a payment of $1000, the remaining balance on the current balance would be paid. She has an outstanding balance of $100.

As long as she pays off the whole sum on her last statement ($1100), she won't be charged interest on the amount that is still outstanding. After that, however, she will need to pay it by the next due date to avoid being penalized.

Checking a Bank Account Balance

It is crucial to know how much money is in the bank account and how much of it is available for spending. Checking the account regularly allows the person to keep track of the finances and identify problems (such as fraud or errors) before they become serious.

Ways to check the bank balance include:

1. Log in online

Balance can be viewed online anytime. To begin, visit the bank's website and access the account details. One will look for a "Login" or "Account Access" option. If this is the first visit, the person needs to select "Register" from the available options.

2. Mobile apps & text messages

Most banks have applications (or at least mobile-friendly websites) that enable a person to check the account online and on the road. Typically, apps allow the person to accomplish even more than he could on a desktop computer.

​​Most banks highly encourage customers to deposit checks with a mobile device, allowing them to stop wasting time traveling to a branch and start receiving their funds faster.

Some banks offer text message options. It means customers can request for statement balance without logging in online to the bank app or website.

3. Utilize ATM

ATMs can deliver account updates. Simply insert the debit or ATM card and follow the on-screen instructions. It is recommended to utilize the ATM of the same bank as other ATMs charge a fee.

4. Call the bank (traditional way)

A person can call the bank to obtain the balance if a more traditional method is preferred. They need to make a call during specific hours to speak with a representative. However, the majority of banks use automated systems that deliver account information 24/7.

5. Set-up notification

One can have the bank send push notifications when certain events occur. This provides the account with an automatic precaution. In addition, one can filter the types of messages they receive and assume that everything is in order until they hear from the bank if they have alerts in place.

Researched and authored by Khadega Bazarah Linkedin

Reviewed and Edited by Parul Gupta | LinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources: