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What is a Running Balance?

A running balance can relate to the amount owed on a local bar tab.
Checking a running balance can help a credit card user know how much is needed for the next payment.
Subtracting the amount of a check from the account total provides the holder with a running balance.
Spreadsheets can be used to keep a running balance.
Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 19 August 2014
  • Copyright Protected:
    2003-2014
    Conjecture Corporation
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A running balance is the sum total of funds that are present in a given credit or debit account. A balance of this type may be related to the current amount owed on a local store account, a credit card, or even the current amount of a tab ran at a local pub or tavern. At the same time, it cany refer to the amount of resources currently housed in a savings or checking account, or some other type of interest bearing investment.

There are a number of reasons why maintaining a running balance is important. In terms of the balance on a checking account, checking the current status of that balance from time to time makes it possible to know how much money is available. This makes it possible to schedule the payment of upcoming debts, as well as to verify which issued checks and other withdrawals have posted to the account. By maintaining an accurate balance, it is possible to ensure that there is money to cover all withdrawals and avoid incurring any type of penalty charges.

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Along with making sure the checkbook is accurate and up to date, checking a running balance is helpful when it comes to credit accounts. Knowing the current balance in each account makes it possible for a person to determine her net worth, as well as make arrangements to meet upcoming debt obligations in a timely manner. Monitoring the balance on each credit account is particularly important if the goal is to get out of debt or at least keep the total amount of indebtedness under a certain figure.

One of the most common amenities that local businesses extend to regular customers is the tab. Basically, a tab is how much is owed to the business by the client. The arrangement normally includes a covenant by the client to pay the entire amount within a certain period of time. For example, the customer may be allowed to run a tab at the local bar or a restaurant with the understanding that the bill will be paid in full by the end of the week. At any point in time, the customer can ask for the current balance and make payments on that total.

As with all forms of financial accounting, the most accurate way to check on a running balance is to maintain accurate records. Most accounting software packages include spreadsheet options to help with the task, and it is possible to create a balance sheet as well as detail sheets connected with each debit and credit account associated with the individual or business. This makes it possible to monitor each account and even to calculate a cumulative balance on both Accounts Payable and Accounts Receivable line items. Using this data makes balancing the ratio of cash-to-debt much easier to understand and manage in an effective manner.

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Discuss this Article

FernValley
Post 1

I used to have a lot of trouble keeping track of my running balance on my accounts. These days, though, I use online banking and also avoid writing checks, since they can take several days to go through. Some people get their balances text messaged or emailed to them every day as well, but I just try to check it every few days or so, and it usually works for me.

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