Account Stated Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Account Stated, written in plain English, along with examples of how it is used.
What is Account Stated?
n. account stated is a agreement between the parties, by which a balance is struck in favor of one of them.
History and Meaning of Account Stated
Account stated is a term used in business and commercial law to describe an agreement reached between two parties regarding the amount owed on an account or set of accounts. Essentially, an account stated is a legal agreement between a creditor and debtor, in which the parties agree to the outstanding balance of an account. This usually means that the debtor has agreed to pay the creditor a certain amount, and that amount is then considered to be a final settlement of the outstanding debt.
The history of account stated can be traced back to English common law, where it was recognized as a concept in the Courts of Chancery. Under common law, an account stated was essentially a mutual agreement between the parties that the account was accurate and the balance was owed. However, the modern legal definition of account stated has evolved over time and varies somewhat depending on the jurisdiction.
Examples of Account Stated
Company A sends a statement of account to Company B, which includes a list of the goods and services supplied, along with their prices. Company B then reviews the statement of account and either confirms that the statement is correct, or disputes some of the items on the invoice. If Company B confirms that the statement is correct, an account stated is said to exist, and the balance owed becomes legally binding.
John owes $500 to Jane for freelance writing services provided by Jane. Jane sends a statement of account to John outlining the services provided and their prices. John confirms that the statement is correct, and an account stated is said to exist. The $500 becomes legally binding and John is obligated to pay Jane the full amount.
A company periodically sends a statement of account to their customer, which reflects the total amount due for the services or goods sold to the customer. If the customer reviews and agrees to the statement, then an account stated is said to exist.
Legal Terms Similar to Account Stated
Open Account: A type of account where a customer can purchase items on credit and pay the balance on a specified date, typically with interest. Open accounts are used commonly in business-to-business transactions.
Account Ledge: A ledger that records all transactions relating to a specific customer account, including sales, payments, and any outstanding balances.
Accrual Accounting: A method of accounting that recognizes revenue and expenses when they are incurred, regardless of when they are actually paid. Accrual accounting is used by businesses that operate on credit and often involves creating accounts receivable and accounts payable.