What is Ledger Balance in Demat Account

The ledger balance in Demat account is an ordered computerised collection of documents that contains a complete record of every debit and credit regarding securities. In order to give investors quick access to any income or expenditure details concerning a specific date or period, the balance sheet has all information set out on individual pages.

To learn more about what ledger balance in a demat account, its working procedure, and its importance, along with examples, read this detailed guide below.

What is Ledger Balance in Demat account?

The ledger balance in a demat account is a total record of transactions that includes the financial and stock transactions into and out of your demat account. If you think that the ledger can only have a positive balance, think again. There are some extreme cases where the negative ledger balance in a demat account is also possible.

What Is Ledger Balance

Typically, the demat account can be opened with any SEBI registered depository participant (DP), which can be a broker, bank, or financial institution. It is advisable to have the demat account with the broker since it makes the smooth flow of stocks much easier between the trading account and Demat account. A Demat account holds the shares, debentures, and other securities of the investor in an electronic format. The Demat account also has an available ledger balance at any point in time.

What is actually meant by the ledger balance? The DP, where the investor can open a Demat account, computes the ledger balance of the Demat account on a daily basis on an end-of-day basis. The ledger balance is the net impact of all the cash receipts and payments concerning shares and other securities the investor holds. Apart from the payments for the purchase of shares and the receipts for the sale of shares, other charges and inflows are also calculated as part of the ledger account. The net balance thus calculated will be the opening ledger balance for the next working day.

How Demat Ledger Balance Works?

Once you enter the special four digit TPIN number the the transactions are approved and processed, the financial institution or bank that houses the Demat account enters them into the ledger. the financial institution or bank that houses the Demat account enters them into the ledger. Thus, all transactions are entered on either side (debit or credit), and the ledger balance is derived by subtracting the debt from the credit.

Transactions include:

• Deposits.
• Inbound and outbound wire transfers.
• Check remittance after clearance.
• Transactions made with debit or credit cards.
• Any rectification entries if necessary.

At the start of the next business day, the ledger balance represents the account balance. Upon reflecting the ledger balance in the Demat account, the account holder can access the funds. Due to exchange requirements, deposits and funds inflows could be delayed since the bank must receive funds from the cheque issuer.

Ledger balances are date-based records and only show transactions and bank receipts for the day. It ensures that the account holder maintains a minimum balance.

How To Calculate A Demat Ledger Balance

To calculate your ledger balance, take the opening balance, subtract the debits, and add any credits or deposits.

The ledger balance of your account may be determined using the formula below:

Ledger Balance = Opening Balance + Credits - Debits

Any debit transaction made throughout the day, such as a bank card transaction, can be included in debits. Deposits, such as payroll, as well as refunds and payments from customers, are considered credits.

You will get your current ledger balance by adding your credits and subtracting your debits from your opening balance.

Importance Of Demat Ledger Balances

1. It is important to keep in mind that the ledger balance is the balance at the beginning of the day, not the balance at the end. End balances are typically calculated at the end of each day, along with available balances.

2. Whenever you log into your mobile banking or online banking, you may not see the most recent information. Some banks display both the current and available balances so consumers can see how much money they have available.

3. You shouldn't rely on your bank statements either. Generally, balances appear on statements based on the ledger balance on the statement date. Any transactions you make after the statement date, such as deposits, withdrawals, written checks, or anything else you do, may affect your available balance.

4. Maintaining up-to-date records ensures you're always working with the most accurate balance. If you keep your ledger, you can keep a running total after accounting for all transactions in your account.

Example Of A Ledger Balance in Demat Account

A ledger balance example can help you understand what it means. Suppose you start your week with a Rs. 40,000 balance in your checking account, receive a Rs. 80,000 paycheck deposit, and make a Rs. 18,000 debit on your bank card. Despite these additional transactions, your ledger balance will remain at Rs. 40,000 throughout Monday. Due to the fact that the check hasn't cleared, the debit transaction is still pending, and your ledger balance is based on what happened at the start of the business day, not throughout the day.

Ledger Balance Vs. Available Balance

Ledger balances are different from available balances, which are funds that are available for withdrawal at any time. Ledger balances remain unchanged throughout the day, so real-time transaction updates are not included. As transactions are made throughout the day, a bank account's available balance changes frequently. The available balance includes recent automated teller machine (ATM) withdrawals, deposits, and other transactions as the bank receives the information.

You must understand the difference between ledger balance and available balance to make sound financial decisions. If an account holder writes a check or makes a transaction after viewing the ledger balance, they may withdraw more money than is available. The bank or business may make an overdraft charge to the other party as well as fees from their bank or business. If a customer monitors their balances regularly, they will be alerted to any unauthorised transactions or bank errors.

Is It Possible To Have a Negative Ledger Balance?

In the case of broker cum demat accounts, the debits are made to the consolidated ledger, which includes the flows pertaining to the trading account and the demat account. For instance, the AMC charges may be due, but there may not be enough balance in the trading account. In such cases, the ledger can show a negative balance. Even in the case of 3-in-1 accounts, if the balance is insufficient in the bank account, it can show as a negative balance in the ledger account, including the bank return charges. Also, in the case of F&O being traded in the same trading account, any debit on MTM debit for F&O futures or short options positions that are not paid can show up as a negative ledger balance.

A quick word on the negative ledger balance. In such cases, the broker is entitled to either block fresh transactions, withdrawals, or even credit of shares to the Demat account on purchase. Investors must keep a constant tab on the ledger account to ensure there is no debit or negative balance in the ledger account.

Conclusion

As you know about ledger balance in the demat account, learn the importance of overviewing your demat account transactions. You can open a free demat account & trading account with BlinkX. Just download the BlinkX trading app and enter your details. After creating your account, you can trade, explore, and learn about the financial market all under one roof.