🧾financial accounting i review
Municipal bonds
Written by the Fiveable Content Team • Last updated September 2025
Written by the Fiveable Content Team • Last updated September 2025
Definition
Municipal bonds are debt securities issued by local government entities to finance public projects. They offer tax-exempt interest income to investors, making them an attractive investment option.
5 Must Know Facts For Your Next Test
- Municipal bonds can be classified into general obligation bonds and revenue bonds.
- The interest earned on municipal bonds is often exempt from federal income tax and sometimes state and local taxes.
- The issuance of municipal bonds requires voter approval in many jurisdictions.
- Credit ratings for municipal bonds assess the issuer's ability to repay the debt, affecting the bond's interest rate.
- Journal entries for municipal bonds include recording the sale, interest payments, amortization of any premium or discount, and repayment at maturity.