BONDS PAYABLE Meaning and
Definition
-
Bonds payable refers to a type of long-term liability that represents the total value of bonds issued by a company or organization that are set to be repaid over a specified period of time. It is a monetary obligation owed by the issuer to bondholders, who are individuals or entities that have purchased these bonds.
Bonds payable have a predetermined interest rate that is fixed or may vary over time, and this interest is paid to bondholders periodically until the bonds reach their maturity date. The interest payments, known as coupon payments, are typically made in fixed intervals, such as annually or semi-annually.
These bonds are usually issued by corporations, municipalities, or government entities as a means to raise capital for various purposes, such as funding expansions, financing projects, or managing day-to-day operations. When a company decides to issue bonds, it essentially borrows money from investors who purchase these bonds. The bonds serve as a promise from the company to repay the principal amount borrowed at maturity, and to make regular interest payments along the way.
Bonds payable can be classified as either secured or unsecured, depending on whether they are backed by specific collateral or assets. Secured bonds provide bondholders with a claim to specific assets in case of default, while unsecured bonds rely solely on the creditworthiness and financial stability of the issuing entity.
Overall, bonds payable play a crucial role in the financial landscape, as they provide investment opportunities for individuals and institutions and financing options for companies and governments.
Etymology of BONDS PAYABLE
The term "BONDS PAYABLE" is a financial accounting term that refers to a liability account used to track and record a company's outstanding bonds. It specifies the amount of long-term debt owed by the company to its bondholders.
The etymology of the word "bonds" can be traced back to the Middle English word "bond" or "band", which referred to a binding obligation or contract. It has its roots in the Old English word "bund", meaning a binding, agreement, or alliance.
The word "payable" comes from the Old French word "paiable", meaning capable of being paid. It is derived from the Latin word "pagabile", which means "that which is to be paid". It signifies that the bonds are a form of debt that the company has an obligation to pay at a future date.
