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Account Balance: Definition and Meaning
Definition
An account balance is the amount currently recorded in an account after all debits, credits, additions, and reductions have been posted.
Why It Matters
Account balances appear throughout the general ledger and form the basis for financial statements. Reviewing balances regularly can help management identify unusual activity, confirm that transactions were recorded properly, and understand the business’s current financial position.
A balance is meaningful only when the underlying records are current and reconciled. A cash balance should be compared with bank activity, and an accounts-receivable balance should be supported by customer invoices and collection records.
Example
A cash account starts the month with $10,000. The business receives $5,000 from customers and pays $3,000 in bills. The ending account balance is $12,000.
Related Terms
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