Bond Interest Expense

What is Bond Interest Expense?

Bond interest expense is the interest a corporation pays to holders of its bonds.

How it Works

One way for a corporation to raise money is by selling bonds. 

Each bond will have a face value. 

This is how much investors will pay for the bond. 

The bond will have a coupon or stated rate. 

This is the interest rate the corporation will pay to investors over the bond term. 

The issuer will pay this interest semi-annually. 

To record each interest payment, you credit the cash account. 

This shows that money came from the bank. 

After this, you debit the interest expense account. 

This shows the money was used for interest expense. 

When complete, the transaction will show that money was taken from the bank and used for interest expense. 

© R.J. Hickman 2020