The Premium on Bonds Payable account is "the amount by which bonds are issued in excess of their face value."
What are bonds payable?
When a firm issues bonds to earn cash, bonds payable are recorded. The corporation is a borrower since it is a bond issuer. As a result, just issuing the bond creates an obligation.
Bonds payable are thus recorded on the liabilities side of the company's balance sheet.
What is the usefulness of Bonds Payable Account?
A liability account called "Bonds payable" is used to track the long-term debt incurred when a company issues bonds.
Bonds are frequently issued by businesses and governments to raise money for capital-intensive projects.
Examples of bonds payable are;
- Bonds issued by Public Utilities to help finance a project
- Fonds issued by hospitals for the creation of new buildings
- Government issue bonds to finance projects etc.
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