diff --git a/lib/core/src/Cardano/Wallet/Primitive/CoinSelection.hs b/lib/core/src/Cardano/Wallet/Primitive/CoinSelection.hs
index ff5e2dafa95..ed77b2e0a7b 100644
--- a/lib/core/src/Cardano/Wallet/Primitive/CoinSelection.hs
+++ b/lib/core/src/Cardano/Wallet/Primitive/CoinSelection.hs
@@ -64,6 +64,7 @@ module Cardano.Wallet.Primitive.CoinSelection
     -- * Internal types and functions
     , ComputeMinimumCollateralParams (..)
     , computeMinimumCollateral
+    , toBalanceConstraintsParams
 
     ) where
 
diff --git a/lib/core/test/unit/Cardano/Wallet/Primitive/CoinSelectionSpec.hs b/lib/core/test/unit/Cardano/Wallet/Primitive/CoinSelectionSpec.hs
index 2011e345417..d6b302e438f 100644
--- a/lib/core/test/unit/Cardano/Wallet/Primitive/CoinSelectionSpec.hs
+++ b/lib/core/test/unit/Cardano/Wallet/Primitive/CoinSelectionSpec.hs
@@ -29,7 +29,10 @@ import Cardano.Wallet.Primitive.CoinSelection
     , selectionHasValidSurplus
     , selectionMinimumCollateral
     , selectionMinimumCost
+    , toBalanceConstraintsParams
     )
+import Cardano.Wallet.Primitive.CoinSelection.Balance
+    ( SelectionLimit )
 import Cardano.Wallet.Primitive.CoinSelection.BalanceSpec
     ( MockAssessTokenBundleSize
     , MockComputeMinimumAdaQuantity
@@ -74,8 +77,12 @@ import Control.Monad.Trans.Except
     ( runExceptT )
 import Data.Either
     ( isLeft, isRight )
+import Data.Function
+    ( (&) )
+import Data.Functor
+    ( (<&>) )
 import Data.Generics.Internal.VL.Lens
-    ( view )
+    ( view, (^.) )
 import Data.Maybe
     ( isJust )
 import GHC.Generics
@@ -133,6 +140,11 @@ spec = describe "Cardano.Wallet.Primitive.CoinSelectionSpec" $ do
             prop_performSelection_onSuccess
             prop_performSelection_onSuccess_hasSuitableCollateral
 
+    parallel $ describe "Constructing balance constraints and parameters" $ do
+
+        it "prop_toBalanceConstraintsParams_computeSelectionLimit" $
+            property prop_toBalanceConstraintsParams_computeSelectionLimit
+
     parallel $ describe "Preparing outputs" $ do
 
         it "prop_prepareOutputsWith_twice" $
@@ -254,6 +266,63 @@ prop_performSelection_onSuccess_hasSuitableCollateral cs _ps selection =
     suitableForCollateral :: (TxIn, TxOut) -> Bool
     suitableForCollateral = isJust . view #utxoSuitableForCollateral cs
 
+--------------------------------------------------------------------------------
+-- Construction of balance constraints and parameters
+--------------------------------------------------------------------------------
+
+-- Tests that function 'toBalanceConstraintsParams' applies the correct
+-- transformation to the 'computeSelectionLimit' function.
+--
+prop_toBalanceConstraintsParams_computeSelectionLimit
+    :: MockSelectionConstraints
+    -> SelectionParams
+    -> Property
+prop_toBalanceConstraintsParams_computeSelectionLimit mockConstraints params =
+    checkCoverage $
+    cover 10 (selectionCollateralRequired params)
+        "collateral required: yes" $
+    cover 10 (not (selectionCollateralRequired params))
+        "collateral required: no" $
+    cover 10 (selectionLimitOriginal > selectionLimitAdjusted)
+        "selection limit (original) > selection limit (adjusted)" $
+    report selectionLimitOriginal
+        "selection limit (original)" $
+    report selectionLimitAdjusted
+        "selection limit (adjusted)" $
+    if selectionCollateralRequired params
+    then
+        conjoin
+            [ selectionLimitOriginal >= selectionLimitAdjusted
+            -- Here we apply a transformation that is the *inverse* of
+            -- the transformation within 'toBalanceConstraintsParams':
+            , selectionLimitOriginal ==
+                (selectionLimitAdjusted <&> (+ maximumCollateralInputCount))
+            ]
+    else
+        selectionLimitOriginal === selectionLimitAdjusted
+  where
+    constraints :: SelectionConstraints
+    constraints = unMockSelectionConstraints mockConstraints
+
+    maximumCollateralInputCount :: Int
+    maximumCollateralInputCount = constraints ^. #maximumCollateralInputCount
+
+    computeSelectionLimitOriginal :: [TxOut] -> SelectionLimit
+    computeSelectionLimitOriginal = constraints ^. #computeSelectionLimit
+
+    computeSelectionLimitAdjusted :: [TxOut] -> SelectionLimit
+    computeSelectionLimitAdjusted =
+        toBalanceConstraintsParams (constraints, params)
+            & fst & view #computeSelectionLimit
+
+    selectionLimitOriginal :: SelectionLimit
+    selectionLimitOriginal = computeSelectionLimitOriginal
+        (params ^. #outputsToCover)
+
+    selectionLimitAdjusted :: SelectionLimit
+    selectionLimitAdjusted = computeSelectionLimitAdjusted
+        (params ^. #outputsToCover)
+
 --------------------------------------------------------------------------------
 -- Preparing outputs
 --------------------------------------------------------------------------------