Course Outline
Join PRO

How do you record bonds that are issued?

Harold Averkamp, CPA, MBA

Definition of Bonds Payable

Bonds payable is a form of long-term debt often issued by large corporations especially public utilities when constructing large, expensive power plants for generating electricity.

Bonds typically pay interest semiannually at a fixed rate until the bonds mature many years into the future. If the bonds’ interest rate is less than the market rates when the bonds are offered, the bonds will sell at a discount. If the bonds’ interest rate is greater than the market rate when the bonds are offered, the bonds will sell at a premium. Any discount or premium on the bonds is recorded in a separate account. Another account is used to record the bond issue costs such as legal fees, auditing fees, registration fees, etc. These bond-related accounts will be presented in the long-term liability section of the balance sheet. Any balances in the discount, premium, or issue costs accounts must be amortized to interest expense over the life of the bonds.

Example of Recording a Bond Issue

Assume that a corporation issues $100 million of bonds payable at an annual interest rate of 5%. The bonds are offered when the market interest rate is 5.1% and there was no accrued interest. As a result, the investors paid $99.5 million for the bonds. The corporation also incurred $1 million of bond issue costs which were paid from bonds’ proceeds.

The entry to record the issuance of the bonds is:

  • Debit Cash for $98.5 million
  • Debit Bond Discount for $0.5 million
  • Debit Bond Issue Costs for $1 million
  • Credit Bonds Payable for $100 million
Join PRO to Track Progress
Must-Watch Video

Advance Your Accounting and Bookkeeping Career

  • Perform better at your job
  • Get hired for a new position
  • Understand your small business
  • Pass your accounting class
Watch the Video

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,645 reviews



PRO Plus

Lifetime Access (One-Time Fee)
Word Scrambles
Bookkeeping Video Training
Financial Statements Video Training
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Payroll Accounting

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on

Learn More About Harold

Certificates of

Certificates of Achievement

We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping:

  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Payroll Accounting
Badges and Points
  • Work towards and earn 30 badges
  • Earn points as you work towards completing our course
View PRO Plus Features
Course Outline
Take the Tour Join Pro Upgrade to Pro Plus