Acceptance

AAA

DEFINITION of 'Acceptance'

A contractual agreement on a time draft or sight draft to pay the amount due at a specified date. The party who is expected to pay the draft writes "accepted", or similar wording indicating acceptance, next to his or her signature along with the date. This person then becomes the acceptor, and is obligated to make the payment by the maturity date.

A banker's acceptance is a time draft honored by a bank, and is typically used in international trade. A trade acceptance is a time draft drawn by the seller of goods on a buyer. In a trade acceptance, the buyer is the acceptor.

INVESTOPEDIA EXPLAINS 'Acceptance'

An acceptance agreement strengthens a time draft by putting the acceptor under contractual obligation to pay. International trade is facilitated by banks enacting banker's acceptances, thereby guaranteeing the payment for goods.

RELATED TERMS
  1. Pay To Order

    A check or draft that must be paid via endorsement and delivery. ...
  2. Payable Through Draft

    A draft that is payable through a specific bank. Payable-through-draft ...
  3. Demand Draft

    A method used by individuals to make transfer payments from one ...
  4. Bank Draft

    A type of check where the payment is guaranteed to be available ...
  5. Banker's Acceptance - BA

    A short-term debt instrument issued by a firm that is guaranteed ...
  6. Maturity Date

    The date on which the principal amount of a note, draft, acceptance ...
RELATED FAQS
  1. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  2. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
  3. How difficult is it to understand business analytics?

    In the abstract, business analytics is the study of financial, economic, consumer and production data through statistical ... Read Full Answer >>
  4. At what levels are core competencies required for businesses operating in the primary ...

    Core competencies help businesses understand their best abilities to perform in the market. Primary sector businesses mine ... Read Full Answer >>
  5. What are the variables in variable costs?

    Variable cost is an economic term that refers to an expense a company is facing that varies based on factors that are inconsistent ... Read Full Answer >>
  6. Can Internet companies be vertically integrated?

    Internet companies can be vertically integrated, just as traditional businesses vertically integrate to consolidate costs ... Read Full Answer >>
Related Articles
  1. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  2. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  3. Retirement

    The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
  4. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  5. Economics

    Understanding Economic Order Quantity

    Economic order quantity is an inventory-related equation that determines the optimum order quantity that a company should hold in its inventory.
  6. Economics

    What is Net Margin?

    The ratio of net profits to revenues for a company that shows how much of each dollar earned by the company is translated into profits.
  7. Investing Basics

    What is a Stock Option?

    An employee stock option is a right given to an employee to buy a certain number of company stock shares at a certain time and price in the future.
  8. Economics

    Understanding Marginal Cost of Production

    Marginal cost of production is an economics term that refers to the change in production costs resulting from producing one more unit.
  9. Economics

    What is Value Added?

    Value added is used to describe instances where a firm takes a product and adds a feature that gives customers a greater sense of value.
  10. Economics

    What is a Wholly Owned Subsidiary?

    A company whose common stock is 100% owned by another company, called the parent company.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center