When the debt service fund makes a payment of principal and interest on an outstanding long-term debt, the governmental activities accounts:
A) Reflect the principal payment only.
B) Reflect the interest payment only.
C) Have no record of the transaction.
D) Reflect both principal and interest payments.

Question

Quizplus · Accepted Answer

When the debt service fund makes a payment of principal and interest on an outstanding long-term debt, the governmental activities accounts reflect both the principal and interest payments. This is because the debt service fund is used to make payments on behalf of the governmental activities, and both principal and interest payments are considered part of the debt service cost.

When the Debt Service Fund Makes a Payment of Principal