What is a Closing Balance in Accounting?

A closing balance in accounting is the total in an account at the end of a reporting period. If an account is a permanent account, this amount is carried forward to the beginning of the next reporting period. If an account is a temporary account, this amount is rolled into retained earnings at the end of the fiscal year, and the account balance is reset to zero.

What is a Closing Balance in Banking?

A closing balance in banking is the balance that a bank reports for any of its customer accounts at the end of the day. This closing balance is the sum of all entries recorded within the account during that day, which may include both debit and credit transactions. There is frequently a difference between the closing balance reported by a bank at the end of a reporting period and the book balance recorded by the customer for the same account. The difference is outstanding transactions, such as deposits in transit, that the bank has not yet recorded, as well as additional transactions, such as interest income, that the customer has not yet recorded. These differences are laid out in a bank reconciliation that the customer should prepare following the end of each reporting period.

Investigating a Closing Balance

A closing balance is comprised of potentially hundreds or thousands of transactions that may impact an account during a reporting period. To investigate the reason why a closing balance is a particular amount, you must review the detailed transactions in an account that roll up into the closing balance.