What Is an Average Daily Balance Company?

An ADB company is most commonly a company that routinely lends money to others, such as a bank, credit union, or credit card company.

For example, a bank reports the average daily balance to the Federal Reserve Bank to determine the amount of funds they will be allocated to use as loans. Credit card companies might use average daily balance to determine the amount they will use to calculate a cardholder's finance charge.

Before ADB calculations can be run, a company must first:

  • exist within the General Ledger application

  • have an identified balancing account

  • be defined as an ADB company

  • have defined ADB accounts within the company

Balancing Accounts

Before defining your company as an ADB company, you must first determine which account will be used as the balancing account. A balancing account is used to make sure the balance sheet is always in balance by holding undistributed retained earnings and the balance of all balance sheet accounts not flagged as ADB. This account must be a new or existing active equity account, but does not need to be an ADB account.

Average Daily Balance Accounts

Note: When you change an existing account with posted values to an ADB account, calculations are not run retroactively.

Average Daily Balance accounts are posting accounts that hold the balances used in ADB calculations. Any new accounts you will need can be defined as ADB accounts before the company has been defined as an ADB company. However, once new ADB accounts are defined, account details cannot be modified until the company has been defined as an ADB company.

After your company has been defined as an ADB company, you can change any existing accounts to ADB accounts.