A county government borrows $1,500,000 from a local bank at the beginning of 2019, to fund general operations. Principal and $90,000 in interest ($45,000 per year) are both due two years later when the loan is repaid at the end of 2020. The loan is reported in the general fund. Which statement below is true concerning the general fund?

Question

Quizplus · Accepted Answer

When the general fund receives the loan in 2019, it credits other financing sources, which adds to fund balance. The interest is not reported until 2020, the year it is due. Both principal and interest payments are reported as expenditures and reduce fund balance when paid.

A County Government Borrows $1,500,000 from a Local Bank at the Beginning