Whenever you log in to your trading and demat account, you will see numerous figures displaying your balances, including ledger balance, available balance, and margins. Among all these, the ledger balance holds the key position. But do you know what exactly a ledger balance means?
In today’s blog post, we will give you an overview of what a ledger balance is, its importance, and the difference between a ledger balance and an available balance.
What is Ledger Balance in a Demat Account?
The ledger balance in a demat account is a balance which reflects the total settled funds in your trading account, which is linked to your demat account. This balance is the final figure reflecting all the purchasing, selling, and settlement processes of a day. However, it excludes all unsettled trades and any pending withdrawal.
A trader can track the net movement of funds resulting from the purchase and sale of shares, including brokerage fees and other charges.
Features of Ledger Balance
The important key features of a ledger balance are as follows:
- Net Fund: The ledger balance reflects the net fund after adjusting all debit and credits.
- Charges: All kinds of charges, including brokerage, STT, GST, etc., are factored into this ledger balance.
- Updation: The ledger balance updates regularly. Whenever any financial transaction takes place in your demat account, the ledger balance updates immediately.
- Unsettled Transactions: The ledger balance may sometimes display the amount from recent trades.
- Verification: Ledger can be useful for an investor while reconciling the brokerage and other charges paid by a trader.
Difference Between Ledger Balance and Available Balance
The key difference between the ledger balance and available balance is as follows:
| Particular | Ledger Balance | Available Balance |
|---|---|---|
| Settlement | Ledger balance may include the amount of unsettled trades. | Available does not include any amount of unsettled trades. |
| Frequency | Updates once per business day, typically overnight, after all transactions have been Processed. | This only updates whenever there is any kind of debit or credit of funds in your account. |
| Importance | It helps in tracking all the financial transactions of your trading and demat account. | The available balance only helps you in identifying the amount available for trade and withdrawal. |
| Settlement | Ledger balance includes the amount of unsettled trades. | Available balance does not include the amount from any unsettled trades; it only includes the amount which is available for use. |
| Objective | The objective of the ledger balance is to show you the overall fund position. | The objective of the available balance is to reflect the investable and withdrawal amount. |
Read Also: How to Check Demat Account Status or Balance?
Importance of Ledger Balance
The key importance of the ledger balance in demat account is as follows:
- Tracking Expenses: The ledger balance of a trader reflects all the charges, such as brokerage fees, taxes, etc. Hence, one can easily track all such expenses.
- Reduce Overtrading: Once you know the ledger balance, you can avoid overtrading by evaluating the trading limit of the ledger account.
- Transparency: Ledger balance account is an official record maintained by your stockbroker. This provides transparency on what kind of charges are deducted from your trading and demat account.
- Planning: It helps in planning your future trade based on the available balance in your ledger account.
- Mismatch in Balance: Ledger balance helps resolve the disputes related to any unnecessary expenses deducted from your demat account.
How ledger balance affects your trading decision
The key factors which can affect your trading decision are as follows:
- Identifying True Purchasing Power: Ledger balance shows a complete picture of your account, hence it can give you an estimation of the amount which you can utilise for trading.
- No Rejection of Orders: If you trade based on your available balance instead of your ledger balance, your order might get rejected due to insufficient settled funds.
- Reinvestment: If you sold any shares, then the proceeds of such trade start reflecting in your available balance account immediately, but you can only invest based on the ledger balance.
- Margin Eligibility: Brokers generally calculate the margins based on the ledger balance. Hence, if you plan to trade on margin, then the ledger balance can help you in calculating the margin availability.
Tips to Monitor Your Ledger Balance
The important tips that one should remember while monitoring their ledger balance are as follows:
- Checking Balance: One should check their ledger balance before executing any trade, and should not rely on the available balance.
- Pending Dues: Always keep a track of your ledger balance in order to avoid any penalties due to an unsettled amount.
- Detail View: A trader is required to check the detailed ledger balance in order to check if there are any penalties or additional charges deducted by their broker.
- Corporate Cycle: Equity trades follow a T+1 settlement cycle, which can help in evaluating the available ledger balance.
Read Also: How to Use a Demat Account?
Conclusion
On a concluding note, a ledger balance in your demat account is a key figure which you need to check before placing any buy order. It includes the complete record of your trades, including credit, debit, charges, and any unsettled trades. Understanding your ledger balance can help you make informed decisions and avoid any penalties due to an insufficient balance. Therefore, it is advisable to check your ledger balance before executing any trade.
| S.NO. | Check Out These Interesting Posts You Might Enjoy! |
|---|---|
| 1 | Features and Benefits of Demat Account |
| 2 | Types of Demat Accounts in India |
| 3 | How to Open a Demat Account Online? |
| 4 | Difference Between Demat Account and Trading Account |
| 5 | NSDL Demat Account: Open, Manage & Understand Charges |
Frequently Asked Questions (FAQs)
What is the difference between a ledger balance and an available balance?
The ledger balance will reflect total funds available in your demat account, including unsettled balances of a trade, while the available balance will reflect only the funds which can be used for trading or withdrawal.
Can a ledger balance show negative figures?
Yes, a ledger balance can be negative if your account has any pending charges or penalties that exceed your available funds.
What is the frequency of updating the ledger balance?
The ledger balance is generally updated by your broker on a real-time basis.
Can I withdraw my full ledger balance?
If your ledger balance has any unsettled trade, then you cannot withdraw it. You can withdraw only the available balance from your trading and demat account.
What happens if my trading account balance shows a negative figure?
Whenever your ledger balance shows a negative figure, it indicates that there might be some unpaid dues, such as pending margins, unpaid charges, annual maintenance charges, etc.
