A city's General Fund makes a contribution of $800,000 to an Internal Service Fund (ISF)so that the ISF can operate.How should the ISF report the contribution?

Question

Quizplus · Accepted Answer

The contribution from the General Fund should be reported as a transfer after operating income but before change in net position. This is because the Internal Service Fund (ISF) is a self-sustaining fund and its operations should be reported separately from the General Fund. The contribution is not considered operating revenue or nonoperating revenue, but rather a transfer between two funds within the government entity. This transfer should be reported after operating income but before any changes in net position are accounted for. Therefore, choice C is the correct option. Option D, which suggests direct addition to fund net position, is not appropriate because the funds are separate entities and the contribution does not directly impact the net position of the ISF.

A City's General Fund Makes a Contribution of $800,000 to an Internal