Question

A municipality's general fund transmits cash to the debt service fund to finance principal payments on...

A municipality's general fund transmits cash to the debt service fund to finance principal payments on general obligation debt. The debt service fund is not expected to pay the general fund back.

How will this transaction be recorded by the general fund and the debt service fund?

General Fund

Debt Service Fund
A.

Expenditure

Revenue
B.

Other financing use

Increase in current payables
C.

Increase in current receivables

Increase in current payables
D.

Other financing use

Other financing source
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Answer #1

The answer would be option D.Other financing use(General Fund) Other financing source(Debt Service Fund).

On the examination of the options we find that for the municipality it isn't an expenditure and it cannot be an increase in current receivables as Debt Service would not pay them back and so it can be confirmed that it is an other financing use. And as the Debt Service would not pay it back it isnot an increase in payable for it so it would be other financing source.

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