Dumas County has a December 31 fiscal year-end. In November, the county borrowed $8 million from a local bank, due in six months at 6 percent interest, to finance general government operations. The county pledges property tax revenues to secure the loan. At year-end, how should the county display the bank note in the governmental fund financial statements?

Question

Quizplus · Accepted Answer

In governmental fund financial statements, short-term debt like the bank note described is recognized as a liability in the fund from which the resources to repay the debt will be provided. Since this is a short-term borrowing for general government operations, it should be displayed as notes payable in the General Fund. The schedule of changes in long-term obligations only includes long-term debt, so the short-term note would not be included there.

Dumas County Has a December 31 Fiscal Year-End