IOU

noun
\ˌī-(ˌ)ō-ˈyü \

Definition of IOU 

1 : a paper that has on it the letters IOU, a stated sum, and a signature and that is given as an acknowledgment of debt

Examples of IOU in a Sentence

I don't have any cash, so I'll have to give you an IOU.

First Known Use of IOU

1795, in the meaning defined at sense 1

History and Etymology for IOU

from the pronunciation of I owe you

Keep scrolling for more

Learn More about IOU

Dictionary Entries near IOU

iota

iota adscript

iota subscript

IOU

-ious

IOW

Iowa

Statistics for IOU

Look-up Popularity

Time Traveler for IOU

The first known use of IOU was in 1795

See more words from the same year

Keep scrolling for more

More Definitions for IOU

IOU

noun

Financial Definition of IOU

What It Is

The term IOU is the phonetic spelling of the phrase "I Owe You." In bookkeeping, it signifies an outstanding debt.

How It Works

Usually, an IOU is a signed informal notice of an unpaid debt, sometimes because of partial payment and an outstanding balance due. For example, Company XYZ may buy raw materials for its production but until it sells the finished product, it does not have sufficient cash flow to pay for the raw materials in full. In good faith, Company XYZ makes a partial payment for the materials and issues an IOU for the balance.

Sometimes, a bond contract, the obligation of a bond issuer to repay bondholders, is referred to as an IOU. However, in that case, the IOU or bond contract is a formal legal agreement with specific terms, conditions, and penalties.

An IOU may also be the uncomplicated method of documenting small debts between employees, friends or even family.

Why It Matters

An IOU does not have the same legal requirements or standing as a promissory note or other financial contract. It is usually not witnessed or signed by the lender, nor does it include specific provisions for how or even when it will be repaid. Because of the limited recourse to recover debts under IOUs, they are not usually helpful in securing financing or enforceable in court.

Source: Investing Answers

IOU

noun

English Language Learners Definition of IOU

: a usually written promise to pay a debt

IOU

noun
\ˌī-ō-ˈyü \

Kids Definition of IOU

: a written promise to pay a debt

Keep scrolling for more

More from Merriam-Webster on IOU

See words that rhyme with IOU

Spanish Central: Translation of IOU

Nglish: Translation of IOU for Spanish Speakers

Comments on IOU

What made you want to look up IOU? Please tell us where you read or heard it (including the quote, if possible).

WORD OF THE DAY

to reject or criticize sharply

Get Word of the Day daily email!

Test Your Vocabulary

Words from Greek and Roman Mythology Quiz

  • the-triumph-of-venus-by-alessandro-magnasco
  • Boreal comes from the name of the ancient Greek god of which wind?
How Strong Is Your Vocabulary?

Test your vocabulary with our 10-question quiz!

TAKE THE QUIZ
Word Winder's CrossWinder

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!