In: Accounting
If government bonds are sold at a premium to finance a capital project, what is the important question for the premium? Discussing proper accounting for bond installments in the Capital Projects Fund, Debt Service Fund, and data at the government level, assuming that the premium should be reserved for debt servicing
If bonds are sold at premium that means its interest rate is higher than the current rates in market.
Accounting in capital project fund
Expenditure A/c Dr.
Interest A/c Dr.
To cash A/c
Accounting in Debt service fund
Expenditure Payable A/c Dr.
Interest payable A/c Dr.
To Cash A/c
Accounting at government
Bonds Payable A/c Dr.
Interest A/c Dr.
To Cash A/c