For example, accts payable with a 30 day grace period provides a 30 day interest free loan in the amount of the receivable. A certificate promising payment of a lump sum at maturity plus a stated rate of interest over the period the bond is outstanding. Bondholders may require that firms maintain minimum standards for financial position. Bonds may be categorized as mortgage or debentures. A mortgage bond is tied to a specific asset set and in default the bondholders will receive those assets to satisfy their claims.
Debentures are just promises of the firm to repay principal plus interest.
These bondholders have a general claim against the firms assets in the event of default and are not assured of satisfying claims at default. Firms can redeem bond issues, but if it is before the maturity date the issuer may be requried to pay a premium to re-acquire the bond issue. Bonds can also be callable or convertible. The bond may specify a price and time period at which the bond may be called but bondholders must comply with the bond and accept the redemption. In the example provide above the recorded transaction assumes that the bond was issued when the market interest rate was the same as the state rate on the bond.