IOU stands for “I owe you.” It's a simple written acknowledgment that someone owes money or a favor to someone else. The letters I-O-U sound like the phrase when you say them out loud.

An IOU is usually informal, like a note that says “IOU $10” with a signature and date. If you borrow lunch money from a friend, you might write them an IOU as a promise to pay them back. It's not a formal legal document like a contract, but it serves as a reminder and shows you take the debt seriously.

People also use “IOU” in conversation. If someone does you a favor, you might say “I owe you one,” meaning you're ready to return the favor later. Your friend might joke, “You owe me big time!” after helping you study for a hard test.