Forty-one thousand dollars was transferred to the General Fund from the Trust Fund. (Journal entry completed by instructor--- SEE JOURNAL ENTRY SECTION BELOW) – You are required to explain each line of the journal entry and related financial statement impact.
10. Cash 41,000
Due from Trust Fund 41,000
Explain each line of the journal entry and related financial statement impact.
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Cash is an asset and any increase in the asset of a company or a Trust is debited. Here cash is received by the General Fund from the Trust Fund. It is an increase in the cash balance of the General Fund and hence debited. The source from such asset is received is to be credited. Here Trust fund is the source hence it is credited.
Debiting the cash by $41,000 with increase the current asset balance on the balance sheet by $41,000. Since this amount is received from Trust fund and it is a liability for the General fund to return it to them, a liability will be created for advance under current liabilities. This will increase the current liabilities balance by $41,000 on the balance sheet. Thus both the asset and liability side of the balance sheet will increase by $41,000.
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