What is an example of an IOU?

One example is IOUs in the bond market. Unlike their informal IOU counterparts, bonds are formal debt arrangements that companies and governments issue to raise money. When an investor purchases a bond, the bond issuer is expected to repay the loan with interest after a specific length of time, sometimes making periodic payments.

What is an 'I Owe You' (IOU)?

An “I owe you” (IOU) is a document that records the existence of a debt. It is typically considered an informal agreement and is less likely to be legally binding than a formal contract. An IOU is an informal document that records the existence of a debt that one party owes to another.

What does IOU mean in bookkeeping?

The term IOU is the phonetic spelling of the phrase 'I Owe You.' In bookkeeping, it signifies an outstanding debt. How Does an IOU Work? Usually, an IOU is a signed informal notice of an unpaid debt, sometimes because of partial payment and an outstanding balance due.

Is an IOU legally binding?

It is typically considered an informal agreement and is less likely to be legally binding than a formal contract. An IOU is an informal document that records the existence of a debt that one party owes to another. Due to an IOU’s informal nature, it is unclear whether such a document would be legally binding in a court of law.