Market conditions may force a company to issue its bonds at less than the face value of the bonds.The Discount on Bonds Payable account is used in this situation.This account:

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The Discount on Bonds Payable account is a contra liability account, as it is used to reduce the recorded amount of the liability (bonds payable) to reflect the fact that they were issued at a discount. A contra liability account is an account that is offset against a liability account on the balance sheet, and has the opposite normal balance.

Market Conditions May Force a Company to Issue Its Bonds