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Simple English definitions for legal terms
book entry
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A quick definition of book entry:
Book entry: A way of keeping track of who owns stocks without using paper certificates. Instead, a brokerage firm sends customers confirmations and statements about their transactions. This helps make trading faster and easier. A central clearing system is often used to help with this process. It's like a middleman that helps settle accounts between different brokerage firms.
A more thorough explanation:
Definition: Book entry refers to the notation made in an accounting journal or the method of reflecting ownership of publicly traded securities without the need for physical stock certificates.
For example, in the case of publicly traded securities, a customer of a brokerage firm receives confirmations of transactions and monthly statements, but not stock certificates. This is known as book entry.
Another example is the central clearing system, which is a method of facilitating securities transactions. In this system, an agent or subsidiary of an exchange acts as a clearinghouse for member brokerage firms by clearing their checks, settling their accounts, and delivering their payments. Most transactions are reflected solely by computerized book entries, and clearing-house statements are submitted showing the net balance to be paid to reconcile the member firm's accounts.
These examples illustrate how book entry is used to keep track of ownership and transactions without the need for physical certificates or paper records.