Definition of acceptance

A bill of exchange that binds one party (the acceptor) to pay a specific amount to another at a stated time in the future. A type of time draft used particularly in international trade. If it is drawn directly by the seller of goods on the buyer, it is called a trade acceptance or trade bill. Acceptances can also be issued by finance companies or banks and used as a means of financing trade. A banker's acceptance (BA), also called bank bill, is an acceptance drawn on and accepted by a bank. Such bills are sold by banks at a discount (the banker's acceptance (BA) rate), and redeemed with the same or other accepting banks at face value within a relatively short timeframe (typically one to nine months). As such, the paper is effectively a bank-backed, short-term, non-interest bearing note and qualifies as a money market instrument.