PAPER

INVESMENT IN BONDS

Lecturer :
Syamsul Huda, S.Pd., M.Si

Compiled by :
Alfi Hasanah
Yuri Ariyanto

ACCOUNTING STUDY PROGRAM

ECONOMIC FACULTY
SINGAPERBANGSA UNIVERSITY OF KARAWANG
2022

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 PREFACE

Praise and gratitude we pray tp the presence of Allah SWT because thank to His grace,
guidance and gitfs we were given the convenience in preparing the paper, so that we were
able to complete the paper entitled “Investment In Bond”. The purpose in writing this paper
is to fulfill the assignment that given by Mr. Syamsul Huda, S.Pd., M.Si as lecturer in
Intermediate Accounting 2 course.
The author realize this paper is far from perfect because of the limitations of knowledge
and experience. Therefore, all constructive criticism and suggestions will be accepted by the
author with pleasure. The author hopes this paper can be usefull for all praties who need it.

Karawang, 03 Maret 2022

Author

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 TABLE OF CONTENTS

PREFACE..................................................................................................................................................2
TABLE OF CONTENTS..........................................................................................................................3
CHAPTER 1..............................................................................................................................................4
INTRODUCTION.....................................................................................................................................4
1.1 Baground....................................................................................................................................4
1.2 Formulation of the Problem......................................................................................................4
1.3 Purpose.......................................................................................................................................4
CHAPTER II.............................................................................................................................................5
DISCUSSION............................................................................................................................................5
2.1 Definition of Bond Invesment.........................................................................................................5
2.2 Types of Bonds Invesment and Bond.............................................................................................5
2.3 Accrued Interest..............................................................................................................................6
5.4 Amortization of Agio and Disagio of Bonds.............................................................................7
2.5 Payment Receipt..............................................................................................................................9
2.6 Bond Sale........................................................................................................................................10
2.7 Bond Investment Presentation......................................................................................................11
CHAPTER III..........................................................................................................................................12
CONCLUTION.......................................................................................................................................12
3.1 Conclution................................................................................................................................12
BIBLIOGRAPHY.....................................................................................................................................13

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 CHAPTER 1

INTRODUCTION
1.1 Baground
Currently, there are various forms of fund management available and offered to the
public. The most traditional way that people often use to Investing funds is by saving the
funds you have at home. Besides In addition, investment land which is also conventional is
buying land or buying land build a house. Quite a number of people have gone this way
because of the level lucrative and promising. Where as long as you have a certificate or at
least a valid proof of ownership, then the house and land can be said become a fairly safe
investment, especially in big cities with high levels of development and economic growth
that is very very rapidly every year.
The most sophisticated way of investing is buying securities or securities in the capital
market. Investors can buy shares (proof of equity participation in company), bonds (proof of
receivables to the company), and various derivations (derivatives) of stocks and bonds such
as convertible bonds (CB), warrants. Investing in stocks promises a high rate of return very
high. However, people often forget that investing in stocks are also very high risk, as high as
the profit or gain that can be achieved.
Especially for bonds, bonds are not as popular as stocks, but very useful for companies
that need funds and investors. Company those who find it difficult to obtain large amounts of
bank loan funds can obtain public funds through bond sales. Because of the direct
relationship woven with the community of investors, then the loan amount can be larger with
lower interest rates than bank loans.Bonds generally pay fixed interest for the first six
months. Usually, to attract investors, the fixed interest rate on bonds is set more higher than
deposits.
1.2 Formulation of the Problem
From the description above, it can be seen that investment instruments in letters Valuable
has a very good prospect even though it is risky very high. In particular, bonds feel more
attractive if their nature its characteristics are well understood.
Therefore, the issues raised are:
1. What is the definition of a bond investment?
2. What are the types of bond and bond investments?
3. How to record bond repayment before maturity?
4. How to record the sale of bonds before maturity?
5. To find out the recording of bond sales before maturity.
1.3 Purpose
1. To find out what investing in bonds is.
2. To find are the types of bond and bond investments.
3. To find record bond repayment before maturity.
4. To find out the recording of bond sales before maturity.

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 5. To know the presentation of investment in bonds in the financial statements?

CHAPTER II

DISCUSSION

2.1 Definition of Bond Invesment

Bond invesment is one of the most attractive investments by investors. This is
because the bonds have fixed income that eamed from the interest that will be received
periodically and the principal of the bonds at maturity.
Bonds are investments in the form of a statement of debt issued by related parties.
Debt statements that are used as bonds usually come or are issued by the government or
corporations. However, the statement of debt can also be issued by individuals.
In bonds issued by related parties, there is usually a statement that each purchase
of ASR from these bonds, investors are entitled to interest as a sign of ownership. This
interest development presents a profitable opportunity for investors who have purchased
or own assets in the form of a debt statement as a bond investment. Investors or holders
of investment rights in these bonds will be given a sign of ownership after completing the
purchase transaction for the statement of debt. Currently, bond purchase transactions can
also be done digitally.
The ownership certificate is usually present in the form of a coupon and will be
given to investors or bond investment rights holders on a regular basis. The coupon acts
as proof of the profit you get from the bond investment you make. Even so, not all parties
who issue a statement of debt will provide coupons to share the profits.
2.2 Types of Bonds Invesment and Bond
The three types of bond investments are as follows:
1. Company Bonds. These bonds are debt securities issued by a company that wants to
borrow funds from other parties. Companies here can be BUMN (government-owned
companies) or private.
2. Government bonds, namely debt securities issued by the government of a country, as
proof of borrowing funds to its citizens.
3. Municipal bonds. These bonds are both issued by the government, but not by the central
government like ORI or SUKUK, but by local governments.

Types of bonds :
1. Based on its publisher
I. Government Bond or Treasury Bond, is a bond issued by the government. For
example, the central bank or the Ministry of Finance.
II. Corporate Bond, Is a bond issued by a company.

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 III. Municipal Bond, Is a bond issued by the local government to be able to finance
certain projects in an area.

2. Based on Interest Payment System

I. Zero Coupon Bonds, is a bond whose interest payments are made at the same time
at maturity.
II. Coupon Bonds are bonds whose coupon payments are made periodically in
accordance with the provisions of the bond issuer.
III. Fixed Coupon Bonds, is a bond whose interest coupon rate has been determined
before the offering period on the primary market, and the payment is made
periodically.
IV. Floating Coupon Bonds, is a bond whose interest coupon rate is determined
before a certain period of time, or also refers to a provision. For example like
Average Time Deposit (ATD).
3. Based on Their Kind and Characteristics
I. Callable Bond, is a bond that can only be withdrawn at maturity.
II. Convertible Bond, is a bond that can be converted into shares by the bond holder.
III. Non-Convertible Bond, is a bond that cannot be converted into shares.
IV. Euro Bond, is a bond issued abroad in a foreign currency.
V. Yankee Bond, is a bond issued in the local currency in which the bond is offered.
VI. Zero Coupon Bond, is a bond that does not pay interest and is also sold at a
discount.
VII. Floating Rate Bond, is a bond that offers a variable coupon rate.
2.3 Accrued Interest
Accrued interest is a coupon that must be paid by the buyer to the seller of the bond that
arises if the purchase transaction occurs between the coupon payment dates. Here's an
example:
there is a loan of US$ 20,000 with an interest rate of 15%. The loan is received on the
20th of each month. In this scenario, to record the additional interest income received from
the 21st to the 30th, we will use the formula below:
(15% x (10/365)) x US$20.000 = US$82,19

The sum of the interest accrued to the party receiving the payment is a credit for the
interest income account and a debit for the interest interest account. Receivables are then
included in the balance sheet and included as short-term assets. The same amount is also
entered as revenue on the income statement.

Interest accrued for the party who owes payments is a credit to the payments account and
a debit to the interest expense account. Liabilities are included in the balance sheet and as
short-term liabilities. While interest expenses are also included in the income report.

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 In this case, the journal entry is reversing. This means it will be reversed on the first day
of the following month. This will ensure that when a cash transaction occurs in the following
month, the net effect is that only a small portion of the income or expenditure received or
incurred during this period remains in this period.

Using the example above, US$246.58 (15% x (30/365) x US$ 20,000) is received by the
borrowing company on the 20th of the second month. Of that amount, US$ 82.19 related
months were previously recorded as journal entries. This is done to recognize revenue in the
month it is received. Since the journal entries are reversed in the second month, the net effect
is US$164.39 (US$246.58 – US$82.19) from the account payments in the second month. That
is equivalent to 20 days of interest in the second month.

5.4 Amortization of Agio and Disagio of Bonds

In the issuance of bonds, the prevailing interest rate (coupon rate) will be compared with
the market interest rate. If the bond interest rate is the same as the market interest rate, the
bonds are issued at face value. If the bond interest rate is lower than the market interest rate,
the bonds are issued at a discount and recorded in a bond disagio account. each coupon
maturity date or at the end of the year is amortized. Keep in mind that on the maturity date the
party issuing the bond will pay or pay off the face value. In order for the value of the debt to
be equal to the face value, it must be amortized.
-Straight-line method, which is to amortize the same amount each period
Disagio amortization Example:
In the first year of fiscal year 201x, a company issues 5-year bonds worth IDR 1,000,000,000
with 6% interest per semester, i.e. IDR 30,000,000 each (6/12 x 6% x 1,000,000,000) every
January 1 and July 1 and receive cash amounting to Rp 845,562,000. Record interest payments
and amortization disagio
Amortization = 154,438,000 : 10 = 15,443,800
Interest expense = 30,000,000
Journal:
Interest expense Rp 45,443,800
Cash Rp. 30,000,000
Disagio bonds Rp 15,443,800
Bond discount amortization schedule – straight-line method
Date Interest Exp Cash (Credit) Bond Bond Amount
(Debit) Discount(Credit)
Rp.845.562.000
1 July 2015 45.443.800 30.000.000 15.443.800 861.005.800
1 Jan 2020 45.443.800 30.000.000 15.443.800 876.449.600

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1 July 2025 45.443.800 30.000.000 15.443.800 891.893.400
1 Jan 2030 45.443.800 30.000.000 15.443.800 907.337.200
1 July 2035 45.443.800 30.000.000 15.443.800 922.781.000
1 Jan 2040 45.443.800 30.000.000 15.443.800 938.224.800
1 July 2045 45.443.800 30.000.000 15.443.800 953.668.600
1 Jan 2050 45.443.800 30.000.000 15.443.800 969.112.400
1 July 2055 45.443.800 30.000.000 15.443.800 984.556.200
1 Jan 2060 45.443.800 30.000.000 15.443.800 1.000.000.000

Amortization of premiums Example:

A company issues five-year bonds of IDR 2,000,000,000 with 12% interest paid
semi-annually at IDR 120,000,000 each (6/12 x 12% x 2,000,000,000).and receives cash
Rp 2,154,435,000 Record interest payments and amortization of premiums
Amortization = 154,435,000 : 10 = 15,443,500
Interest expense = 120,000,000
Journal:
Interest expense Rp 120,000,000
bond premium Rp 15,443,500
Cash Rp 135,443,500
Bond premiums amortization schedule – straight-line method
Date Cash (Credit) Interest Exp Bond Bond Amount
(Debit) Premium(Credit)
Rp.2.154.435.000
1 July 2015 135.443.500 120.000.000 15.443.500 2.138.991.500
1 Jan 2020 135.443.500 120.000.000 15.443.500 2.123.548.000
1 July 2025 135.443.500 120.000.000 15.443.500 2.108.104.500
1 Jan 2030 135.443.500 120.000.000 15.443.500 2.092.661.000
1 July 2035 135.443.500 120.000.000 15.443.500 2.077.217.500
1 Jan 2040 135.443.500 120.000.000 15.443.500 2.061.774.000
1 July 2045 135.443.500 120.000.000 15.443.500 2.046.330.500
1 Jan 2050 135.443.500 120.000.000 15.443.500 2.030.887.000
1 July 2055 135.443.500 120.000.000 15.443.500 2.015.443.500
1 Jan 2060 135.443.500 120.000.000 15.443.500 2.000.000.000

The effective interest method for amortizing the premium and discount provides a
constant interest rate on the carrying amount of the bonds at the beginning of each period.
This is in contrast to the straight-line method which provides a constant amount of
interest expense.

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2.5 Payment Receipt

Bonds can be withdrawn to be repaid before the maturity date. The difference between
the redemption amount and the total book value of the bonds is recorded as profit or loss
due to the withdrawal of the bonds. The book value of the bonds is the nominal value
plus the unamortized premium or reduced by the unamortized discount. If there is a cost
of selling the bonds, the unamortized selling costs are also deducted from the face value
of the bonds. Gains or losses arising from the redemption of bonds, are included in
extraordinary elements (extra ordinary). Bonds that can be repaid before the maturity date
are usually carried out by paying premiums to the bondholders at the time the settlement
occurs. Accounting for disagio or amortization of premiums in investors' books is no
longer a straight line method but uses an accelerated amortization method.

Bonds withdrawn from circulation can be separated into 2, namely:

 Bonds that are withdrawn and will not be resold : In such bonds, the bonds
payable account is debited for the nominal amount of the bonds drawn.
 The bonds withdrawn will be resold : In this situation, at the time of withdrawal
of the bonds, the debited account is the treasury bonds account. This treasury
bonds account is not an asset account, but is a deduction. Treasury bonds are
debited with the total face value, if the bonds are sold again, then this account is
also credited with the total face value. The difference between the nominal value
and the amount of money received in the sale of treasury bonds is recorded as
agio or disagio.

To provide a clearer picture, below is an example of a bond withdrawal before maturity.

The data obtained from PT A on December 31, 2008 are as follows:

Bond Book Value IDR 10.120.000

Bond Face Value IDR 10.000.000

Bond Agio Amortization / month IDR 5000

The bond interest of 12% is payable every January 1 and July 1. On April 1, 2009 all
bonds were withdrawn from circulation and will not be resold at the exchange rate of 102
plus current interest. Requested:

1. Journalize PT A to record the amortization of the 2009 bond premium.

2. Journalize PT A to record the current interest payments.

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 3. Journalize PT A to record the bond drawdown.

 Amortization of premium on bonds in 2009 : 3 x 5000 = 15,000

Bond premium IDR 15,000
Bond interest cost IDR 15,000
 Interest accruing 1/1 - 1/4 2009 = 12% x 10,000,000 x 3/12 = 300,000
The journal is as follows:
Bond interest cost IDR 300,000
Cash IDR 300,000

 Book value of bonds December 31, 2008 Rp 10.120.000

2009 bond premium amortization Rp 15.000
Book value of bonds 1/4 2009 Rp 10.105.000
Amount of payment : 10,000,000 x 102/100 Rp 10.200.000
Bond withdrawal loss Rp 95.000
The journal is as follows :
Bond debt Rp 10.120.000
Bond withdrawal loss Rp 95.000
Amortization of bond premium Rp 15.000
Cash Rp 10.200.000

2.6 Bond Sale

If bonds held for the purpose of long-term investment are sold before their
maturity date, the profit or loss on sales is calculated based on the amount received with
the book value of the bonds. The book value of the bonds is calculated as follows: The
cost of the bonds plus the accumulated discount until the date of sale or the cost of the
bonds less the amortization of premium until the date of sale. The following is an
example of recording a bond sales journal:

For example, PT ABC owns PT ALIAS bonds with a par value of IDR 1,000,000
which were purchased on January 1, 2003 at a cost of IDR 900,000 and matured on
January 1, 2008. However, on January 1, 2006, the bonds were sold for ID 950,000.
Amortization uses the straight-line method. Then the journal is as follows :

Cash IDR 950.000

Sales loss IDR 10.000

Invest in bonds IDR 1.000.000

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2.7 Bond Investment Presentation

Method of Recording Investment in bonds. Bonds purchased for the purpose of

long-term investment are recorded at the total cost, namely the purchase price plus all
purchase costs such as commissions, stamp duty, fees and so on. If the purchase price is
different from the face value of the bonds, the difference is called the premium or
discount on the bonds.
For example PT. Mei Jaya bought the bonds of PT. May Bong on April 1, 2020,
nominal IDR 50,000,000, 12% interest with a purchase price of IDR 50,000,000. The
purchase fee, namely commission and stamp duty, is IDR 500,000. Bond interest is paid
on June 1 and October 1.
Calculation:

Bond purchase price 50,000,000

Commission and stamp duty 500.000
50.500.000
Current interest (1 April-1 June): 2/12×12%x50,000,000 = IDR 1,000,000
Amount of money paid 51,500,000
On October 1, 2020, which is the date of interest payment, the journal will be made as
follows:
Interest calculation 6/12×12%x50,000,000 = 3,000,000

Journal :

Cash IDR 3,000,000

Bond interest income IDR 3,000,000

The gain or loss on the sale of a long-term investment is usually reported in the income
statement. Income from the sale of investments is generally separated from income
received from business activities. Long-term investments in stocks and bonds are
recorded at cost.

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 CHAPTER III

CONCLUTION
3.1 Conclution
 Bonds also known as fixed income instruments are used by governments or companies
to raise money by borrowing from investors. Bonds are usually issued to raise funds for
specific projects. In return, the bond issuer promises to repay the investment, with
interest, over a specified period of time.
 Three types of bond investments are Company Bonds, Government bonds,
Municipal bonds.
 Obligations that can be withdrawn to be paid back before the due date.
 If bonds held for the purpose of long-term investment are sold before their
maturity date, the profit or loss on sales is calculated based on the amount
received with the book value of the bonds.
 Before maturity, bonds can be released or sold to other parties. And the difference
between the selling price and the book value of the bond investment is recognized
as a gain and vice versa as a loss.

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 BIBLIOGRAPHY

Cimbniaga.co.id. Kenali jenis jenis obligasi sebelum mulai berinvestasi,

https://www.cimbniaga.co.id/id/inspirasi/investasi/kenali-jenis-jenis-obligasi-sebelum-mulai-
berinvestasi.
Accounting.binus.ac.id. Akuntansi investasi obligasi ,
https://accounting.binus.ac.id/2020/07/09/akuntansi-investasi-obligasi/.
Dbs.id. Menghitung potensi keuntungan dari investasi obligasi .
https://www.dbs.id/digibank/id/id/articles/wealth-101-menghitung-potensi-keuntungan-dari-
investasi-obligasi.
Coursehero.com. Amortisasi agio dan disagio dalam penerbitan obligasi tingkat bunga ,
https://www.coursehero.com/file/p7k5dma/Amortisasi-agio-dan-disagio-obligasi-Dalam-
penerbitan-obligasi-tingkat-bunga/.
Academia.edu. Pelunasan obligasi sebelum jatuh tempo,
https://www.academia.edu/26525955/PELUNASAN_OBLIGASI_SEBELUM_JATUH_TEMP
O.
Id.scribd.com. Pelunasan obligasi sebelum jatuh tempo,
https://id.scribd.com/doc/267248639/Pelunasan-Obligasi-Sebelum-Jatuh-Tempo.
Manajemenkeuangan.net. Obligasi, https://manajemenkeuangan.net/obligasi/.
Id.scribd.com. Investasi obligasi kelompok 5,
https://id.scribd.com/document/509526993/INVESTASI-OBLIGASI-KELOMPOK-5.

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