How should financial information for internal service funds be reported in the government-wide financial statements?
A) As part of governmental activities.
B) As part of business-type activities.
C) Amounts allocated proportionately between governmental and business-type activities.
D) Usually as part of governmental activities, unless the internal service fund predominantly serves one or more enterprise funds.

Question

Quizplus · Accepted Answer

Financial information for internal service funds should be reported as part of governmental activities in the government-wide financial statements, unless the internal service fund predominantly serves one or more enterprise funds, in which case it should be reported as part of business-type activities. This is because internal service funds provide goods and services to other departments or funds within the same government entity, and are therefore considered to be part of the government's overall operation. However, if the internal service fund primarily serves enterprise funds, which are essentially proprietary funds that operate like businesses, then it makes more sense to report the financial information as part of business-type activities.

How Should Financial Information for Internal Service Funds Be Reported