Which account is credited when recording the cash received in a bond issuance?

When a business issues bonds and receives cash, the appropriate accounting entry involves crediting the Bonds Payable account. This happens because issuing bonds represents a liability for the company; it is essentially borrowing money from investors with an obligation to repay them in the future.

When bonds are issued, the company receives cash, which it needs to reflect as an increase in cash by debiting the Cash account. At the same time, it incurs a liability that reflects the amount it is obligated to pay back, hence the credit to Bonds Payable. This keeps the accounting equation (Assets = Liabilities + Equity) in balance, as the increase in cash (asset) is matched by an increase in liabilities due to the bonds issued.

Choosing Bonds Payable correctly acknowledges that the company is entering into a financial agreement that increases its liabilities, rather than affecting equity or interest accounts.