Dictionary / Revenue Bond
What does Revenue Bond mean in accounting?
Quick definition
GeneralTerm in municipal accounting specifying one of an issue of bonds by a governmental unit for the purpose of financing the construction or purchase of, or additions to, income-producing enterprises. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
You buy the city's water-system bonds
You run a dry-cleaning shop. On July 11 you park surplus cash by buying $8,500 face of the city's water revenue bonds, 4.25% due 2038, through a broker. That certificate is a revenue bond: one of an issue by a governmental unit to finance an income-producing enterprise (the water plant), repaid from water charges. In QuickBooks Online, debit Investments $8,500 and credit Checking $8,500, and leave Bonds payable alone: you bought the city's bonds, you did not issue them. Later coupon deposits are interest income.
An SBA note is not a revenue bond
You run a bike shop. On February 18 you close a $64,000, 10-year SBA 7(a) with a credit union to expand the repair bay, and the loan officer calls it a revenue bond because you will repay it from shop sales. That paper is a promissory note to one lender, not a revenue bond. A revenue bond is municipal: a governmental unit issues bonds to finance an income-producing public enterprise, and that enterprise's receipts repay the holders. Debit leasehold improvements $64,000 and credit Notes payable (split current and long-term debt); do not open Bonds payable or label this loan a revenue bond in QuickBooks Online.
Why it matters
A revenue bond is a municipal term: a governmental unit issues bonds to build, buy, or expand an income-producing enterprise. You will almost never post this; it appears only when that public issuer finances the project, or when you buy one of the certificates. The enterprise's own receipts repay the holders, not your shop's sales, and the security is those receipts, not a mortgage on issuer property (that neighbor is a mortgage bond). Label a bank or SBA promissory note this way and you invent a public bond issue you never sold, or hide a shop loan as municipal debt.
Further reading
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What is Revenue Bond in bookkeeping?
Term in municipal accounting specifying one of an issue of bonds by a governmental unit for the purpose of financing the construction or purchase of, or additions to, income-producing enterprises.
When should I use Revenue Bond?
Use Revenue Bond when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Revenue Bond?
Revenue Bond is used for revenue bond entries, while Raw Materials covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.