How is the average daily balance caculated?

The average daily balance is calculated by adding the balance of an account at the end of each day over a specific period and then dividing that total by the number of days in the period. For example, if you track the balance over a month, you would sum up the daily balances for each day of the month and divide by the number of days in that month. This method provides a more accurate representation of account activity compared to simply averaging monthly balances.