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.

RELATED TERMS
  1. Trade Date Accounting

    A method company accountants and bookkeepers use to record transactions ...
  2. Transaction Date

    The date upon which a security or other financial instrument ...
  3. Cash Transaction

    A transaction that is settled with cash on the same day as the ...
  4. T+1 (T+2,T+3)

    Abbreviations that refer to the settlement date of security transactions. ...
  5. Settlement Date

    1. The date by which an executed security trade must be settled. ...
  6. Fictitious Trade

    1) A trade that is booked with an execution date far in the future, ...
Related Articles
  1. Investing

    What is a Settlement Date?

    A settlement date is the day a security trade must be settled.
  2. Investing

    What's a General Ledger?

    As the heart of the double-entry accounting system, the general ledger is the record of a company's entire financial transaction history. The left side of the general ledger is for debits: assets, ...
  3. Investing

    What is Accounting?

    Accounting is the recording of financial transactions of a business or organization. It also includes the process of summarizing, analyzing and reporting these transactions in financial statements.
  4. Investing

    Understanding the Accounting Cycle

    An accounting cycle consists of the traditional procedures performed to record business events and transactions in a company’s accounting records.
  5. Investing

    Explaining Double Entry Accounting

    Double entry is an accounting and bookkeeping term describing the method of entering transactions into the accounting records.
  6. Investing

    What's Recorded in a Cash Book?

    A cash book is an accounting book that records all cash receipts and cash payments before they’re recorded in a business’s general ledger.
  7. Personal Finance

    Accountant: Job Description & Average Salary

    Discover what the job description of an accountant entails, along with education and training, salary and skills necessary for success.
  8. Investing

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  9. Investing

    What Do T+1, T+2, and T+3 Mean?

    T+1, T+2, and T+3 denote the day settlement occurs on a transaction.
RELATED FAQS
  1. Do I own a stock as of the trade date or the settlement date?

    When it comes to buying shares, there are two key dates involved in the transaction. The first date is the trade date, which ... Read Answer >>
  2. What do T+1, T+2 and T+3 mean?

    Whenever you buy or sell a stock, bond or mutual fund, there are two important dates of which you should always be aware: ... Read Answer >>
  3. Given a good bookkeeping system, would financial accounting be necessary?

    Bookkeeping and financial accounting may seem like they are new creations, but variations have been around for millennia. ... Read Answer >>
  4. What's the difference between the general ledger and a general journal?

    Keeping records for most organizations require a double-entry bookkeeping system, which revolves around transactions in the ... Read Answer >>
  5. How can I use Excel as my business's general ledger?

    Follow these steps to set up a general ledger accounting system in Excel. A small business can use Excel as a substitute ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center