A city's General Fund provides a two-year loan to the Internal Service Fund. To record this transaction the city should record a debit to what account in the General Fund?

Question

Quizplus · Accepted Answer

The General Fund is providing a loan to the Internal Service Fund, which means that the General Fund is advancing funds to the Internal Service Fund. Therefore, the correct account to debit in the General Fund is "Advance to the Internal Service Fund." Option A, "Due from the Internal Service Fund" would be incorrect because it implies that the Internal Service Fund owes money to the General Fund, when in fact it is the other way around. Option C, "Advance from the Internal Service Fund" would be incorrect because it implies that the Internal Service Fund is advancing funds to the General Fund, which is not the case in this transaction. Option D, "Transfer to the Internal Service Fund" would be incorrect because a transfer is not the same as a loan, and this transaction specifically involves a loan of funds from the General Fund to the Internal Service Fund.

A City's General Fund Provides a Two-Year Loan to the Internal