Bowdon City voted to establish an internal service fund to account for its printing services. The city transferred $500,000 cash from the general fund to the newly created internal service fund.

-The appropriate entry in the general fund to account for this transfer is a credit to cash for $500,000 and a debit for $500,000 to
A) Due from internal service fund.
B) Nonreciprocal transfer-out.
C) Expenditures.
D) Investment in internal service fund.

Question

Bowdon City voted to establish an internal service fund to account for its printing services.  The city transferred $500,000 cash from the general fund to the newly created internal service fund.

-The appropriate entry in the general fund to account for this transfer is a credit to cash for $500,000 and a debit for $500,000 to
A) Due from internal service fund.
B) Nonreciprocal transfer-out.
C) Expenditures.
D) Investment in internal service fund.

Quizplus · Accepted Answer

The correct entry for a transfer out of the general fund to another fund (in this case, presumably to an internal service fund or similar) is a debit to a nonreciprocal transfer-out account. This reflects the outflow of resources from the general fund without direct reciprocal value coming back to the general fund.

Bowdon City Voted to Establish an Internal Service Fund to Account