Settlement Date Accounting


DEFINITION of 'Settlement Date Accounting'

An accounting method that accountants and bookkeepers use to record transactions in the company's general ledger when a given transaction has been fulfilled, which is when performance by both parties has been satisfied. Under settlement date accounting, any interest associated with a transaction must also be accrued when the transaction is settled.

Settlement date accounting is similar to trade date accounting.

BREAKING DOWN 'Settlement Date Accounting'

It is an important policy that companies have with respect to when a given transaction should be recorded in the company's general ledger, which is used to create the company's financial statements. However, settlement date accounting is the norm for larger transactions that are material for financial representation and operations.

For example, assume XYZ Company, which has a December 31 year end, entered into a loan agreement with a bank on December 27, but the loan was not delivered until January 15 of the following year. The financial statements dated on December 31 will not include the loan amount.

  1. Adjusting Journal Entry

    An entry in financial reporting that occurs at the end of a reporting ...
  2. Accounting

    The systematic and comprehensive recording of financial transactions ...
  3. Settlement Risk

    The risk that one party will fail to deliver the terms of a contract ...
  4. Pre-Settlement Risk

    The risk that one party of a contract will fail to meet the terms ...
  5. Accrual Accounting

    Accrual accounting is an accounting method that measures the ...
  6. General Ledger

    A company's main accounting records. A general ledger is a complete ...
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