What type of account is discount on bond payable?

Discount on bonds payable is a contra account to bonds payable that decreases the value of the bonds and is subtracted from the bonds payable in the long‐term liability section of the balance sheet.

Is a discount on bonds payable an asset or liability?

§ Although Discount on Bonds Payable has a debit balance, it is not an asset; it is a contra account, which is deducted from bonds payable on the balance sheet. § The $98,000 represents the carrying amount of the bonds.

Where does discount on bonds payable go on the balance sheet?

The premium or the discount on bonds payable that has not yet been amortized to interest expense will be reported immediately after the par value of the bonds in the liabilities section of the balance sheet.

Is a discount on a bond a liability?

What Is a Discount on Bonds Payable? Discount on Bonds Payable is a contra liability account that is debited for the purpose of offsetting a credit on a liability account Bonds Payable and reporting the net book value, or carrying value, of an entity’s outstanding bonds.

How should discount on bonds payable be reported on the financial statements premium on bonds payable?

Discount (premium) on bonds payable should be reported in the balance sheet as a direct deduction from (addition to) the face amount of the bond.

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What kind of account is discount?

Accounting for the Discount Allowed and Discount Received

When the seller allows a discount, this is recorded as a reduction of revenues, and is typically a debit to a contra revenue account.

How do you account for bond discount?

The account Discount on Bonds Payable (or Bond Discount or Unamortized Bond Discount) is a contra liability account since it will have a debit balance. Discount on Bonds Payable will always appear on the balance sheet with the account Bonds Payable.

How do you account for bonds issued at a discount?

If there was a discount on bonds payable, then the periodic entry is a debit to interest expense and a credit to discount on bonds payable; this has the effect of increasing the overall interest expense recorded by the issuer.

Where should a discount or premium appear in the financial statements?

Therefore, the discount or premium shall be reported in the balance sheet as a direct deduction from or addition to the face amount of the note. Similarly, debt issuance costs related to a note shall be reported in the balance sheet as a direct deduction from the face amount of that note.