Legal Definitions - net balance

The term net balance refers to the final amount remaining after all specified deductions, expenses, or liabilities have been subtracted from an initial or gross amount. It represents the actual sum that is either owed, received, or available after all necessary adjustments have been made.

Here are some examples to illustrate the concept of a net balance:

• Example 1: Sale of a Business Asset

  A small business sells an old piece of machinery for $25,000. However, the sale involves a broker's commission of $2,000 and transportation costs to deliver the machinery to the buyer, totaling $500. To determine the actual profit from the sale, the business calculates the net balance.

  Illustration: The net balance for the business from this sale would be $25,000 (gross sale price) - $2,000 (commission) - $500 (transportation costs) = $22,500. This is the final amount the business effectively gains after all direct costs associated with the sale are accounted for.

• Example 2: Employee's Paycheck

  An employee earns a gross salary of $3,000 for a pay period. From this amount, various deductions are made, including federal and state income taxes, social security contributions, health insurance premiums, and a contribution to their retirement plan. These deductions total $800.

  Illustration: The net balance on the employee's paycheck is $3,000 (gross salary) - $800 (total deductions) = $2,200. This is the actual "take-home pay" the employee receives after all mandatory and voluntary deductions have been applied.

• Example 3: Final Payment for Services Rendered

  A freelance graphic designer completes a project for a client, billing a total of $5,000. The client had previously paid an initial deposit of $1,500. Additionally, the designer agreed to a $200 discount for early completion of the project.

  Illustration: The net balance due from the client would be $5,000 (total bill) - $1,500 (deposit paid) - $200 (discount) = $3,300. This represents the final outstanding amount the client needs to pay after accounting for the initial payment and the agreed-upon discount.