Definition of Balance of an Account
A balance in an account relates to financial concerns. A balance is the end-result of transactions increasing and decreasing an amount. Balance is the "left-over" after transactions are done. You may start with a dollar amount and after awhile, you end up with another amount, larger or smaller with what you started with and that would be a balance on that account. A balance is what you have at a certain point in time.
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Accounts
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An account is a way to segregate financial information about a person or a subject. An account can be defined as:
1. A record to accumulate financial transactions for a business, asset or an individual. This record is used by retail outfits, banks, brokerage firms and others. An example of this would be bank accounts, saving accounts and investment accounts.
2. More generally, an arrangement between a buyer and a seller in which payments are to be made in the future. Store credit, layaway plans are some examples of this type of account. Credit cards and lines of credit can be also examples of this definition of account.
3. In accounting, an account is a vehicle used to identify, and accumulate different financial transactions. It is a way to organize financial information by type. For example, a business spends $800 on rent, $40 on postage and $120 on utilities. Each of these transactions most likely would be booked on three different accounts: rent, postage and utilities. So that later on, if someone wants to know how much was spent on rent or postage, a report can be generated on those accounts and provide that information easily.
Beginning Balance
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A beginning balance lets you know what you started with. In a new checking account, for example, you start with a zero beginning balance. Transactions are applied toward this beginning balance, increasing and decreasing it. For example, you can open a new checking account, add a deposit of $500 and write a check for $50. These transactions will look like:
Beginning balance $0
Add deposit +500
Less check - 50
Ending balance $450There is a beginning balance and an ending balance, after transactions happened.The ending balance is $450.
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Timing
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When looking at an account balance, you should know the time period that balance was for. Some account balances are for transactions at a certain point in time, such as a balance in an expense account in accounting. That information is usually for a month or for year-to-date and not longer. A balance in your bank account is for transactions up to a certain point and doesn't include un-cashed checks. For example, if you see a balance of $100 in your checking account statement, but you know you wrote $300 worth of checks not yet cashed by the bank, you had better deposit $200 to cover those checks.
Positive or Negative
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Balance in accounts can be positive or negative. Depending on context, positive can be good and negative bad. A positive balance in your checking account is a good thing; but a positive value in your credit card statement means that you owe that much money.
A negative balance may mean that you're due a refund. Many businesses issue credit memos to other businesses instead of refunds so that they can apply the credit memo to outstanding invoices.
Considerations
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Because of technology, many balances on accounts are available online 24/7. Many people can access their accounts online and get balances on as-needed basis. For instance, maybe you need to pay a large bill, but you're not sure if you have enough balance on your checking account to cover for the payment. You can log in and get your balance so that you decide when and how to pay that bill.
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References
- Photo Credit balancing checkbook image by palms from Fotolia.com
