Accounting for bonds – only differs on the date when the bonds are authorized for issue.

Issuance of Bonds
Issuance at face amount:
Cash xxx
Bonds Payable xxx

Issuance more than face amount:

Cash xxx
Bonds Payable xxx
Premium on Bonds Payable xxx

Issuance less than face amount:

Cash xxx
Discount on Bonds Payable xxx
Bonds Payable xxx

Payment of Interest
Interest Expense xxx
Cash xxx

Interest Expense xxx

Accrued Interest Payable xxx
Cash xxx

Accrual of Interest (year-end)

Interest Expense xxx
Accrued Interest Payable xxx

Reversal of Accrued Interest (optional)

Accrued Interest xxx
Interest Expense xxx

Bond issue cost (transaction cost):

Legal fees: Costs associated with drafting and reviewing bond documents, ensuring regulatory
compliance, and obtaining legal opinions on the bond issuance.
Underwriting fees: Fees paid to investment banks or financial institutions that underwrite the
bond issuance, guaranteeing to purchase the entire bond offering and reselling it to investors.
Rating agency fees: Fees paid to credit rating agencies, such as Moody’s, Standard & Poor’s, or
Fitch, for assessing the creditworthiness of the bond issuer and assigning a credit rating to the
bonds.
Printing and distribution costs: Expenses related to printing the bond prospectus, marketing
materials, and other documents, as well as the costs of distributing them to potential investors.
Trustee fees: Fees paid to the trustee, an independent third party responsible for overseeing the
bond’s administration and protecting bondholders’ interests.
Registration and filing fees: Costs associated with registering the bond issuance with regulatory
authorities, such as the Securities and Exchange Commission (SEC) in the United States.