balance of the bond discountthat remains to be amortized in future years. It is shown as a contraaccount to bonds payable (bond investment) to arrive at the net liability (asset). (It should be noted that an alternative treatment is to show the bond investment account net of the discount.) When the unamortized bond discount is amortized, interest expense is charged.
difference between the face value (par value) of a bond and the proceeds received from the sale of the bond by the issuing company, less whatever portion has been amortized, that is, written off to expense, as recorded periodically on the profit and loss statement.
difference between the face value (par value) of a bond and the proceeds received from the sale of the bond by the issuing company, less whatever portion has been amortized, that is, written off to expense as recorded periodically on the Profit and Loss Statement. At the time of issue, a company has two alternatives: (1) it can immediately absorb as an expense the amount of discount plus costs related to the issue, such as legal, printing, registration, and other similar expenses, or (2) it can decide to treat the total discount and expenses as a deferred charge, recorded as an asset to be written off over the life of the bonds or by any other schedule the company finds desirable. The amount still to be expensed at any point is the unamortized bond discount.
