Bond is a written promise by a company, government to pay the face amount at the maturity date. A corporation may seek long term financing through the issuance of bonds.
Bonds are similar to notes payable in that the corporation is obligated to repay a stated amount at a specific time and to pay interest at regular intervals to investors. There is however, an important difference. Notes payable are usually owed to one investor, but bonds can be subdivided and sold to many investors through securities brokers. This allows a corporation to raise larger amounts of money than might be obtainable from any single lender. While bonds are traded as marketable securities, they differ from stock in that bonds are debt instruments only. Ownership of a bond does not provide an ownership interest in the issuing entity.
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