when a company sells (issues) bonds, this debt is a long-term liability on the company's balance sheet, recorded in the account bonds payable based on the contract amount. after the bonds are sold, the book value of bonds payable is increased or decreased to reflect the actual amount received in payment for the bonds. if the bonds sell for less than face value, the contra account discount on bonds payable is debited for the difference between the amount of cash received and the face value of the bonds.