From ACT Wiki
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.
The balance in a financial account reflects all items that have been posted to the account.