In the debt service fund

Question

Quizplus · Accepted Answer

The debt service fund is used to account for the payment of interest and principal on long-term debt. Therefore, when cash is received for this purpose, it should be recorded as an Other Financing Sources-Nonreciprocal Transfer. This entry reflects an inflow of cash into the fund without a requirement for repayment, and it does not affect the fund's revenues. No other entries are required in this case. Option A is incorrect because revenues would not be recorded for the receipt of cash in the debt service fund. Option C is incorrect because it shows the opposite entry, which would be made if the fund was providing cash to another fund. Option D is incorrect because it suggests that nothing would be recorded in the fund, which is not correct.

In the Debt Service Fund