Chapter 6 Clip 3

  • What Is an IOU?
  • How an IOU work?
  • Key Point of an IOU.
  1. An IOU is a written acknowledgement of debt that one party owes another.
  2. In business transactions, an IOU may be followed by a more formal written contract.
  3. The informality of the IOU can make it difficult to enforce, and usually impossible to sell or trade.
  4. The term IOU is also used in bookkeeping to refer to accounts receivable.
  5. IOUs are less formal and legally binding than promissory notes.