OPEN ACCOUNT Meaning and
Definition
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An open account refers to a financial arrangement between a buyer and a seller in which goods or services are provided on credit without explicit terms or specific payment conditions. It is a credit account established to allow a business or individual to make purchases or receive services on an ongoing basis, without the need for immediate payment. In an open account arrangement, the buyer receives the goods or services and agrees to pay the seller at a later date, usually within an agreed-upon time frame.
The terms of an open account are typically flexible and can vary depending on the parties involved. However, it generally involves a mutual trust and understanding between the buyer and the seller for payment. The seller may extend credit to the buyer based on factors such as their creditworthiness, purchasing history, or a prior working relationship.
When using an open account, the buyer incurs a liability to the seller for the outstanding amount, which is recorded as accounts payable on the buyer's financial statements. The seller, on the other hand, records the outstanding amount as accounts receivable. To regulate and formalize the open account arrangement, parties often develop a credit agreement or contract that outlines the specific terms and conditions, including the payment due date, interest (if any), and any penalties for late or non-payment.
Open accounts are commonly used in business-to-business transactions, allowing companies to maintain a working relationship and facilitate recurring purchases without the need for immediate cash payments. Conversely, in consumer transactions, open accounts may be established by retailers or service providers to offer credit to customers, enabling them to make purchases and pay at a later date.
Common Misspellings for OPEN ACCOUNT
- ipen account
- kpen account
- lpen account
- ppen account
- 0pen account
- 9pen account
- ooen account
- olen account
- o-en account
- o0en account
- opwn account
- opsn account
- opdn account
- oprn account
- op4n account
- op3n account
- opeb account
- opem account
- opej account
Etymology of OPEN ACCOUNT
The word "open" originated from the Old English word "openian", which means "to open, uncover, or disclose". Its roots can be traced back to the Proto-Germanic word "opanan" and the Proto-Indo-European root "upo", meaning "up" or "over".
The word "account" has Latin origins, derived from the Latin word "computare", which means "to count, reckon, or calculate". This term developed through Old French to become "accounte" in Middle English, before later evolving into the modern word "account".
When combined, "open account" refers to a financial arrangement where a customer is given permission to make purchases on credit, with the obligation to settle the account at a later date.
Similar spelling words for OPEN ACCOUNT
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