Account Balance

What is Account Balance?

Account balance refers to the total available funds in a specific account, which is the remaining amount in the account after subtracting the total debits (expenses) and adding the total credits (income). It is also known as account surplus. The account balance can be used to measure the disposable funds in the account, which can be used to pay the holder’s or institution’s expenses or investments. If the account balance is below zero, it indicates a net debt, such as when an overdraft occurs in a checking account. For financial accounts with recurring bills (like utilities or mortgage loans), the account balance may also reflect the owed amount.

The account balance is crucial for the financial management of individuals and businesses. It can be used to track the flow of funds in the account, forecast future income and expenses, and ensure there are enough funds to meet spending needs in the account.

The account balance can be a positive number, indicating a surplus, or a negative number, indicating an overdraft or liability. A positive balance shows there are available funds in the account, while a negative balance means the account is in deficit, which may require actions such as increasing income or reducing expenses to correct the financial situation.

How to Understand Account Balance?

The account balance reflects the total available funds in a particular account, representing the current financial status of the account. It can be understood from the following aspects:

1. Total Available Funds: The account balance reflects the total funds available for use in the account, including all income, deposits, interest, and other additions, as well as all expenses, withdrawals, and fees. The account balance can be used to determine if there are enough funds to cover expenses or make investments.
2. Real-Time Changes: The account balance changes in real time with account activities. Whenever there are deposits or withdrawals, the account balance adjusts accordingly. Therefore, checking the balance regularly helps to understand the current financial status of the account.
3. Positive and Negative Values: The account balance can be positive, zero, or negative. A positive balance means there are remaining funds available, a zero balance means no funds are left, and a negative balance indicates an overdraft or debt, meaning the liabilities exceed the available funds.
4. Important Indicator: The account balance is a critical indicator for personal and business financial management. By tracking the balance, one can grasp their financial status, avoid overdraft and late payments, and make reasonable budget planning and decisions.

Types of Accounts with Account Balances

Account balances can exist in various types of accounts, including but not limited to the following common types:

1. Bank Savings Accounts: These are some of the most common types of accounts, such as personal savings accounts, checking accounts, or time deposit accounts. These accounts are often used to store personal or business funds and may earn interest. The account balance represents the total funds available in these accounts.
2. Credit Card Accounts: A credit card account is a type of credit account that allows the cardholder to borrow and spend within a certain credit limit. The account balance in a credit card account is the amount spent but not yet repaid.
3. Investment Accounts: Investment accounts are typically used for purchasing and holding various investment products such as stocks, bonds, and funds. The account balance represents the investment value in the account, taking into account the market value of stocks or funds and unsettled transactions.
4. E-Wallet Accounts: The account balance in an e-wallet or mobile payment app (such as PayPal, Alipay, Venmo, etc.) represents the total funds available for online or mobile payments.

Features of Account Balances

Account balance is a critical indicator for monitoring account health, identifying potential issues, and making financial decisions. It has the following features:

1. Reflects Financial Status: The account balance shows the total available funds in the account, reflecting its current financial status. It is derived from offsetting the account's income and expenses.
2. Real-Time Changes: The account balance changes in real time with account activities. Every deposit, withdrawal, transfer, income, or expense affects the account balance accordingly.
3. Positive and Negative Values: The account balance can be positive, zero, or negative. A positive balance indicates available funds, zero balance means no remaining funds, and a negative balance indicates an overdraft or debt.
4. Important Financial Indicator: The account balance is a vital financial management indicator for individuals and businesses. It helps understand available funds, track cash flow, make budget plans, and make sound spending and saving decisions.
5. Monitor Account Health: By regularly checking the account balance, one can monitor the account's health and avoid overdrafts, late payments, or other financial issues.
6. Influencing Factors: The account balance is affected by deposits, withdrawals, interest, fees, exchange rate changes, and unsettled transactions. Overdraft or loan interest also impacts the account balance.
7. Actual Available Funds: The account balance represents the total available funds in the account but does not consider frozen funds, unsettled transactions, or pending expenses, which may impact the available funds.

Difference Between Account Balance and Available Balance

The account balance and available balance represent different aspects of the amount in a bank account with the following differences:

1. The account balance is the total amount in the account, including all deposits, income, and interest, minus all expenses, withdrawals, and fees. The account balance can be positive, zero, or negative, representing all funds in the account, regardless of whether they can be immediately used or withdrawn.
2. The available balance is the total amount of funds in the account that can be immediately used or withdrawn. It considers factors beyond the account balance, such as frozen funds, unsettled transactions, or pending expenses. The available balance is the actual usable funds in the account.

Therefore, the available balance can be less than the account balance, especially when there are unsettled transactions or frozen funds. The available balance reflects the actual funds available for payment and use, while the account balance represents the total amount in the account.

In daily use, when people check their account balance, they usually see the available balance as it more accurately reflects the funds they can operate and use. The available balance is crucial for payments, withdrawals, transfers, or other transactions, while the account balance is more for understanding the overall financial status of the account.

Account Balance vs. Available Credit

Account balance and available credit are two important indicators for holders of credit accounts. They represent different aspects of the amount in a credit account (such as a credit card account).

1. The account balance refers to the amount owed in the credit account, i.e., the amount that has been spent but not yet repaid. The account balance represents the current total amount owed, including billed expenses, interest, and fees. The account balance can be positive, zero, or negative, with negative indicating an overdraft.
2. Available credit refers to the unused available limit in the credit account, i.e., the remaining limit the account holder can continue to spend within the credit card account. Available credit depends on the credit limit set by the credit card issuer, representing the additional amount that can be borrowed without resulting in an overdraft.

Thus, the account balance is the amount owed that has been spent, while the available credit is the remaining loanable amount. The account balance plus the available credit equals the credit limit, which is the maximum total amount the account holder can borrow.