Difference between revisions of "Balance"

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(Add two examples.)
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:<span style="color:#4B0082">'''''Example 1: Balance in our favour'''''</span>
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:<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: Overdraft balance in favour of the bank'''''</span>
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:<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.

Latest 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.


See also