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What are bonds payable in accounting?

Question:

What are bonds payable in accounting?

Stocks and Bonds:

When a company becomes large enough to massively expand, they need to find ways to generate financing from multiple souces. Selling stocks is a way to get cash in exchange for the promise of sharing profits while bonds can generate financing using debt.

Answer and Explanation:

Bonds payable in accounting reflect obligations to pay the face value of bonds sold.

When a company sells a bond in exchange for cash, the company makes an entry of "bonds payable" for the face value of the bond as an obligation to pay when the bond reaches maturity. The sale of a bond may be for less or more than face value and those are recorded as liabilities as "Bond Premium" or "Bond Discount".


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Long-Term Debt: Definition, Cost & Formula

from Financial Accounting: Help and Review

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