Werner issues bonds at a discount. the related discount account should be classified as a Contra Liability.
A contra liability account in finance is one that has a debit made against it with the specific intent of offsetting a credit made to another liability account. Liabilities are reduced by contra liabilities, which have a negative balance. In other words, an asset or liability's book value is modified using the contra liability account. A contra asset account is not categorized as either an asset or a liability because it does not represent long-term value or a potential obligation.
Among the accounts with a contra-liability is Discount on Bonds Payable, Bond issue expenses, Discount on Payable Notes.
Learn more about Contra Liability here.
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