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Simple English definitions for legal terms
mutual account
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A quick definition of mutual account:
A mutual account is a type of account that shows transactions between two parties, where both parties owe each other money. It's like a running tally of what each person owes the other. For example, if you borrow $10 from your friend and then lend them $5, you would have a mutual account with a balance of $5 that you owe them. It's important to keep track of mutual accounts to make sure everyone is paid back what they are owed.A more thorough explanation:
Definition: A mutual account is an account that shows mutual transactions between parties, such as debits and credits on both sides of the account. It arises when there are mutual dealings, and the account is allowed to run with a view to an ultimate adjustment of the balance. Each party to a mutual account occupies both a debtor and creditor relation with regard to the other party.
Example: A mutual account can be created between two business partners who have mutual dealings. For example, if one partner owes the other partner money for goods or services, and the other partner owes the first partner money for other goods or services, they can create a mutual account to keep track of their transactions. The account will show debits and credits on both sides, and the balance will be adjusted when the account is settled.
This example illustrates the definition of a mutual account because it shows how two parties can use a mutual account to keep track of their mutual transactions. The account will show the debits and credits on both sides, and the balance will be adjusted when the account is settled.