Bonds Payable
Definition: Long-term debt securities issued
Scope:ModerateDifficulty:Moderate
Long-term debt securities issued
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Issue at face value | ||
| Issue $500,000, 6% bonds at par. | ||
| CashAsset+ | $500,000 | |
| Bonds PayableLiability+ | $500,000 | |
| Market rate equals coupon rate. | ||
| 2. Pay semi-annual interest | ||
| $500,000 × 6% × 1/2 = $15,000. | ||
| Interest ExpenseExpense+ | $15,000 | |
| CashAsset− | $15,000 | |
| Coupon payment to bondholders. | ||
| 3. Retire at maturity | ||
| Repay $500,000 face value. | ||
| Bonds PayableLiability− | $500,000 | |
| CashAsset− | $500,000 | |
| Liability fully extinguished. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$500,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$15,000.00
$500,000.00
$15,000.00
Bonds PayableBonds PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$500,000.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$500,000.00
Normal bal. ▶
$0.00
Interest ExpenseExpense account — cost of borrowing money. Debits increase the balance. Credits decrease the balance.ExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$15,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$15,000.00
DurationLong-Term
Related Reports
- Balance Sheet(Primary — Long-term liability)
- Form 10-K Annual Report(Primary — Debt note)
Related Subjects
Related
Used in Formula
See Also
- Convertible Debt
- Yield to Maturity
- CashPaired in entry: Issue bonds at par
External Links
- Bond (finance) — Wikipedia