What is Ledger Balance in a Demat Account?

For any business, maintaining accurate books of accounts is essential to keep track of the cash flow. Financial statements, such as the profit and loss account and ledger balances, help accurately track the company’s finances. Similarly, for stock market investors, demat accounts play a crucial role in tracking the securities being bought, sold, and held. Demat account only hold these securities in the digital format. The fund transactions are recorded in the trading account link to the Demat account.

Demat accounts are used to hold securities in electronic format, while fund transactions are recorded in the trading account’s ledger.

Now, similar to the way businesses track the flow of funds in and out, stock market investors also need to keep track of the movement of funds in their demat accounts. The ledger balance displays the net fund balance in the trading account, taking into account all transactions related to securities.

In this article, we will explore the concept of demat account ledger balance and its significance.

What is Ledger Balance in a Demat Account?

A business records all the funds coming in and going out in its ledgers. Similarly, a demat account has a ledger that records all transactions, including cash receipts and stock-related transactions.

The ledger balance represents the net balance after accounting for all transactions in the account during the day. The ledger balance is updated whenever you purchase or sell a security and is calculated dynamically as transactions take place.

How is Ledger Balance Calculated?

Once a transaction is approved, the broker or financial institution records the transaction in the ledger. The electronic ledger records transactions in chronological order. The ledger records the debits and credits in the account, and the balance is updated on the next business day.

The ledger balance in a demat account is calculated by crediting the money that comes in and debiting the money that goes out.

Ledger Balance = Opening Balance + Credits – Debits

Suppose an investor has an opening balance of ₹50,000 in the demat account. He sells a few shares from his portfolio for which he receives ₹10,000. Additionally, the investor transfers ₹5,000 from the demat account to the bank account.

Ledger Balance = ₹50,000 + ₹10,000 – ₹5,000 = ₹55,000

Ledger Balance vs. Available Balance

The ledge balance is updated after transactions have been completed for the day to provide the opening balance the next day. On the other hand, the available balance updated on real-time basis depending on number of transactions takes place during the day.

Where to Find Ledger Balance on Your Broker Terminal?

Checking your demat ledger balance through your broker terminal is easy and convenient. Here’s how you can do it:

• Log in to your broker terminal’s website or application.
• Navigate to the transaction history or account statements.
• You can then view the date-wise transactions that have taken place, as well as the demat account balance.

Importance of Monitoring Ledger Balance

Monitoring the demat ledger balance can be helpful for investors in multiple ways.

Managing Your Investments

The ledger balance can be a helpful tool in managing your investments and portfolio. Since the ledger balance reflects the total value of funds available for further investing.

Investment Decisions

The ledger balance is taken into account when making investment decisions. Investors should consider their ledger balance when deciding whether to purchase additional shares or sell underperforming investments.

Financial Decisions

Financial planning is of utmost importance for everyone. The ledger balance provides a clear picture of your demat account and can help you make informed financial decisions, such as planning for retirement or creating an emergency fund. 

Common Mistakes and Misunderstandings 

Although the demat ledger account balance is an easy-to-understand statement, investors might make some common mistakes, such as: 

• Confusing the ledger balance with the available balance. 
• Not regularly tracking your demat ledger balance can lead to confusion.
• In the case of derivative trades, the ledger balance can be negative if the mark-to-market (MTM) debits are greater than the available funds in the account.
• AMC charges or demat account charges are debits that can lead to a negative ledger balance if sufficient funds are not mained in the trading account.
• When an investor has a debit balance in their account, failure to pay may result in delayed payment charges.