ExpertMedium1 markMultiple Choice
CPA · Question 45 · Area III: State & Local Governments
A city's General Fund transfers $50,000 to a Debt Service Fund to pay principal and interest. How should the General Fund report this transaction?
A city's General Fund transfers $50,000 to a Debt Service Fund to pay principal and interest. How should the General Fund report this transaction?
Answer options:
A.
Expenditure
B.
Other Financing Use
C.
Expense
D.
Reduction of Revenue
How to approach this question
Interfund Transfers (Non-reciprocal) -> Other Financing Sources (Receiving Fund) / Uses (Paying Fund).
Full Answer
B.Other Financing Use✓ Correct
B
Transfers between funds are reported as Other Financing Uses (in the paying fund) and Other Financing Sources (in the receiving fund). They are not expenditures because the government as a whole hasn't spent the money yet.
Common mistakes
Classifying as Expenditure.
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