Discounts or premiums are contra-accounts that are subtracted from or added to bonds payable on the balance sheet.

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Discounts and premiums are contra-accounts that are used to adjust the face value of bonds payable on the balance sheet. A discount is subtracted from the face value, while a premium is added to the face value. This adjustment is necessary because bonds are often issued at a price that is different from their face value, and the contra-accounts reflect the difference between the issue price and the face value.

Discounts or Premiums Are Contra-Accounts That Are Subtracted from or Added