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Calhoun County makes annual transfers from the general fund to the debt service fund to pay principal and interest on long-term debt.
-In the debt service fund, what is the appropriate entry when the principal payment is made?
A)Debit Bonds Payable; Credit Cash.
B)Debit Expenditures; Credit Cash.
C)Debit Other Financing Uses-Transfer; Credit Cash.
D)No entry is required.

Question

Use the following information to answer questions 
Calhoun County makes annual transfers from the general fund to the debt service fund to pay principal and interest on long-term debt.
-In the debt service fund, what is the appropriate entry when the principal payment is made?
A)Debit Bonds Payable; Credit Cash.
B)Debit Expenditures; Credit Cash.
C)Debit Other Financing Uses-Transfer; Credit Cash.
D)No entry is required.

Quizplus · Accepted Answer

In governmental accounting, when a principal payment is made from the debt service fund, it is recorded as an expenditure, not a reduction of liability, hence the entry is to debit Expenditures and credit Cash.

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