Companies need funds in addition to capital ( owner's equity). To finance this additional requirement they have to borrow from public they issue bonds or debentures. The bond is an obligation imposed by a contract or promise. It is an interest bearing certificate issued by a government or business redeemable on a specified data. The reason for issuing bonds is to arrange a long-term finance in large amounts which is single or a few banks or lenders cannot supply. The amount of a loan is divided into small units known as bonds. this small division facilitates the investor to buy them. Each bond is long term interest carrying certificate.For the debtor company it is bond payable shown on the long term liability side of the balance sheet. For the creditor it is bond receivable.
Subscribe to:
Post Comments (Atom)
0 comments:
Post a Comment