A governmental unit establishes a central motor pool to provide service to governmental departments and agencies.The pricing objective of the central motor pool is to break-even by charging all agencies a user fee.What type of fund should be established for this activity?
A)Special Revenue Fund
B)Agency Fund
C)Permanent Fund
D)Internal Service Fund

Question

Quizplus · Accepted Answer

An Internal Service Fund is used when a governmental unit charges its departments and agencies for goods or services provided on a cost-reimbursement basis. In this scenario, the central motor pool is charging user fees to break-even and provide services to governmental agencies. Therefore, an Internal Service Fund is the appropriate choice for this activity. A Special Revenue Fund is used to account for specific revenue sources that are restricted for particular purposes. An Agency Fund is used to account for assets held by a governmental unit in a trustee capacity for individuals, private organizations, or other governmental units. A Permanent Fund is used to account for endowments or trust funds established for the benefit of the government or its citizens.

A Governmental Unit Establishes a Central Motor Pool to Provide