If a government has deposited or transferred financial resources dedicated for payment of debt service to the debt service fund and payment of principal and interest is due early in the following year, then the expenditure and related liability may be recognized in the debt service fund prior to year end.

Question

Quizplus · Accepted Answer

If the financial resources have already been deposited or transferred to the debt service fund, then it is appropriate to recognize the expenditure and related liability in the current year even if the payment is due in the following year. This follows the accrual accounting principle of recognizing expenses when they are incurred, not when they are paid.

If a Government Has Deposited or Transferred Financial Resources Dedicated