Money Market Account

Accounting Dictionary

Money Market Account

A money market account consists of commercial paper with very short maturities.

If a company borrowed money for 30 days, the note it signed would be called commercial paper. A bank would buy lots and lots of notes for very short maturities, bundle them together and sell them as a money market account. If that same company borrowed money for 1-3 years, the loan might be put into a short term bond fund. If the company borrowed money for 5 years or more the notes might be put into a bond fund. It’s the same company borrowing money. Whether the notes go into a money market, short term bond fund, or bond fund depends on the maturity date of the note. The shorter the maturity the safer the investment is deemed to be.

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