Previously Rose City issued bonds with a face value of $10 million to construct a new city maintenance facility. Assume that the city maintains its books and records in a manner that facilitates the preparation of fund financial statements. What is the appropriate entry when the city receives a progress billing from the contractor?

Question

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When a government entity like a city receives a progress billing from a contractor for a capital project, such as the construction of a new city maintenance facility, the appropriate accounting entry in the governmental funds (where the modified accrual basis of accounting is used) is to debit Expenditures and credit Accounts Payable. This reflects the current financial obligation incurred due to the progress billing.

Previously Rose City Issued Bonds with a Face Value of $10