What is a Bond Payable?
A bond payable is a long term liability on the balance sheet of a business, representing an amount owed by the business to a bondholder.
Issuing bonds is a way of raising larger amounts of finance from multiple, long term investors by way of loans. Bonds are issued by a business when the loan required is too large for one investor. The loan required is split into units called bonds, and for each bond a bond payable certificate is issued to the investor (the bondholder).
The bonds will stipulate the term, known as the maturity date, and the interest rate to be used. At the maturity date the investor will receive repayment of the principal amount invested and interest. Bonds are transferable, and an investor can sell their bond before the maturity date.
A bond payable is more fully explained in our bond payable tutorial.
For further information see the Wikipedia bond payable definition.
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