On account – definition and meaning
On account can mean the partial payment of an amount somebody owes. When talking about purchasing a product, the term means buying it on credit. In other words, if I buy something ‘on account,’ it means I purchase it now and pay at a later date.
In the UK, the term ‘payments on account,’ when dealing with taxes, are advance payments towards your tax bill. This includes Class 4 National Insurance if the taxpayer is self-employed.
Payments ‘on account’ to lenders
Most banks, financial institutions, and other lenders accept payments on account. This means paying an amount of money towards clearing a debt.
In fact, if you have a mortgage, each monthly installment is a payment on account. In other words, each month you pay towards clearing your debt with the mortgage lender.
According to BusinessDictionary.com, the term means:
“Partial payment of a debt or an invoice. Also sale or purchase on deferred payment terms (credit).”
In companies, accountants use the term when they make a credit to the Accounts Payable account.
If the company owes a vendor for services, it enters that amount as a debit in the Accounts Payable. That entry remains until it pays it in full.
After the company pays the balance, the accountant writes ‘paid on account.’ This tells people that the Accounts Payable is not a liability any longer.
On account of
When we add the word ‘of’ to the term, the meaning is quite different. We are then introducing an explanation or reason for something.
For example, imagine John had to deliver a speech. However, he couldn’t’ because he had a sore throat.
We could say “John declined to deliver the speech, on account of a sore throat.”
In this case, the term means the same as ‘by reason of’ or ‘because of.’
On (someone’s) account
What happens if I refer to someone in the middle of the term? It means ‘for the benefit’ of that person.
Imagine you are in a room with a friend. Your friend is being especially quiet because she does not want to disturb you. You want to tell her that you do not mind if she makes a lot of noise. You can say:
“Do not remain quiet on my account.”