The General Fund provides a recurring annual subsidy to the Mass Transit Enterprise Fund to keep bus fares at a reasonable level.How should the General Fund report the subsidy in its financial statements?
A)as an expenditure
B)as a long-term advance
C)as a transfer out
D)as a reimbursement

Question

Quizplus · Accepted Answer

The General Fund should report the subsidy as a transfer out in its financial statements because it is transferring funds to another fund (Mass Transit Enterprise Fund). It is not an expenditure because the purpose of the subsidy is to support the operations of the Mass Transit Enterprise Fund and not for the benefit of the General Fund itself. It is not a long-term advance because the subsidy is provided annually and not as a one-time advance. It is also not a reimbursement because there is no expense incurred by the General Fund that needs to be reimbursed.

The General Fund Provides a Recurring Annual Subsidy to the Mass