The Discount on Bonds Payable account is:
A) A liability.
B) A contra liability.
C) An expense.
D) A contra expense.
E) A contra equity.

Question

Quizplus · Accepted Answer

The Discount on Bonds Payable account is a contra liability account. It shows the amount of discount that was given when the bonds were issued. The discount is amortized over the life of the bonds and reduces the amount of interest expense that is recorded each period. Therefore, it is a contra liability account as it reduces the amount of the underlying liability - the bonds payable.

The Discount on Bonds Payable Account Is