The financial accounting phrases term and serial bonds refer to indentures or contracts entered into by companies that represent a promise to pay. The maturity of bonds payable can be of two forms. Term bonds mature on a single date, while serial bonds mature in installments.
Since bonds payable represents long term obligations of the company, they are shown in the long term liabilities section of the balance sheet.
Issuing long-term bonds represents an important source of financing for many large companies. Bonds payable is used to categorize the payments due when a company issues an indenture, or enters into a contract that represents a promise to pay.
The maturity date of a specific bond issue generally takes one of two forms:
Serial bonds are usually quoted using their yield, while term bonds are quoted using their price.
Term bonds sometimes carry a call feature that allows the issuer to redeem the bonds prior to their maturity date. If the indenture carries this provision, it will include a schedule of redemption dates and prices.