Balance: Difference between revisions
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imported>Doug Williamson (Add two examples.) |
imported>Doug Williamson (Layout.) |
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:<span style="color:#4B0082">'''''Example 1: | :<span style="color:#4B0082">'''''Example 1: Overdrawn account becomes balance in our favour'''''</span> | ||
:We have an overdraft of £50k at the start of April. | :We have an overdraft of £50k at the start of April. | ||
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:<span style="color:#4B0082">'''''Example 2: | :<span style="color:#4B0082">'''''Example 2: Closing overdrawn balance in favour of the bank'''''</span> | ||
:Our opening bank account balance for the month of May is £10k cash. | :Our opening bank account balance for the month of May is £10k cash. |
Revision as of 22:54, 20 May 2020
1. Banking.
The balance in a bank account reflects all items that have been deposited into and paid out of the account.
- Example 1: Overdrawn account becomes balance in our favour
- We have an overdraft of £50k at the start of April.
- The balance at the start of a period is known as an opening balance. In our example it is £50k.
- So we owe £50k to the bank.
- We deposit £60k into the account during the month of April.
- This repays our overdraft, with some cash left over.
- At the end of April, our bank account now has a positive amount in it, of:
- -50 + 60 = 10
- We have £10k cash in our bank account at the end of April.
- The amount at the end of a period is the closing balance. In our example the closing balance is £10k.
- Example 2: Closing overdrawn balance in favour of the bank
- Our opening bank account balance for the month of May is £10k cash.
- So the opening cash is £10k.
- We pay £30k out of the account during May.
- Opening balance + deposits - withdrawals = Closing balance
- +10 - 30 = -20
- This is an overdraft of £20k at the end of May.
- We have a closing overdraft balance of £20k.
2. Accounting.
The balance in a financial account reflects all items that have been posted to the account.