The City of Holbrook transferred $100,000 from the general fund to a debt service fund for payment of interest. The appropriate entry in the general fund to record this transfer would be
A) Debit Expenditures $100,000; Credit Cash $100,000.
B) Debit Nonreciprocal transfer-out $100,000; Credit Cash $100,000.
C) Debit Fund balance$100,000; Credit Cash $100,000.
D) Debit Reciprocal transfer-out $100,000; Credit Cash $100,000.

Question

Quizplus · Accepted Answer

Transfers between funds in governmental accounting are recorded as other financing sources or uses, depending on the direction of the transfer. In this case, transferring money out of the general fund for debt service is considered a nonreciprocal transfer-out, hence the correct entry is to debit Nonreciprocal transfer-out and credit Cash.

The City of Holbrook Transferred $100,000 from the General Fund