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What Accounting Professionals Should Know About Bonds

by Bryce Sanders | Nov 15, 2019   ()

We are currently living in a low interest rate environment. Great if your business is borrowing money, not so great if your client needs interest to supplement their retirement income. As their accountant, your role as a fiduciary is a big advantage. How could you advise them?

The first consideration is “For how long?” If your client has extra cash and needs to pay their child’s spring college tuition, the money is best placed in a time deposit (CD) at their bank. They can’t afford to take any risks. The need will be real a few months away.

Many people need income now, yet don’t mind tying up the money if they can get a higher return. These people typically buy fixed income instruments, commonly called bonds. The issuer borrows the money for a specific period. They pay at the declared rate of interest. You get your money back at maturity.

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Source: Accounting Web
Source: Accounting Web

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