Bonds & Long-Term Notes
There are a good number of ways to create funding when it comes to organizations and businesses of any size. Two of the more common ones, and indeed the ones that will be covered in this brief research report, are long-term notes and bonds. These two forms of capital creation are similar in terms of what they provide for the organization that issues the bonds or notes. However, they are quite different in how they operate and can be sold or otherwise handled after they are issued. The commonalities and differences between these funding devices will be described along with what each of them is in terms of definition and function. While bonds and notes both serve the same basic purpose, they are different in some very important respects.
Analysis
From an accounting standpoint, both bonds and long-term notes are quite similar. One way in which they are basically the same is that they are written promises to pay interest as well as the principal amount borrowed on some future specified date. Another common thread between the two is that both are reported as a liability from an accounting standpoint. Finally, the interest from both instruments are accrued as a current liability. When looking further at the accounting practices and implications of bonds or notes, it is important to know and remember that if a bond or note is going to reach its maturity within a year of the balance sheet date and the payment for such maturity is going to create a reduction in working capital, then this would make it a current liability. If that is not the case because the maturity, and thus the reduction in working capital, happens more than a year from the date of the balance sheet, than that means it is a long-term liability. When it comes to notes in particular, the latter of those two would obviously be the focus of this report alongside the bonds that are also mentioned (Accounting Coach, 2017).
In less of an accounting context, there are a few other things that should...
References
Accounting Coach. (2017). What is the difference between a note payable and a bond payable? | Accounting Coach. AccountingCoach.com. Retrieved 18 August 2017, from https://www.accountingcoach.com/blog/note-payable-bond-payable
Lewis, J. (2017). What Is the Main Difference Between Notes Payable & Bonds Payable?. smallbusiness.chron.com. Retrieved 18 August 2017, from http://smallbusiness.chron.com/main-difference-between-notes-payable-bonds-payable-36843.html
Motley Fool. (2017). What Is the Difference Between a Bond vs. Note Payable? -- The Motley Fool. The Motley Fool. Retrieved 18 August 2017, from https://www.fool.com/knowledge-center/bond-vs-note-payable.aspx
UTEP. (2017). Bonds and Long-Term Notes. University of Texas at El Paso. Retrieved 18 August 2017, from http://accounting.utep.edu/sglandon/c14/c14b.pdf
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