When the General Fund records a billing from an internal service fund, the journal entry will include which of the following?

When the General Fund records a billing from an internal service fund, the journal entry will include which of the following?

• A. Debit Expenditures
• B. Debit Interfund Transfers
• C. Credit Expenditures
• D. Credit Internal Service Fund

Answer: (A)

When a fund uses services from the internal service fund, the General Fund records the cost as an expenditure. The appropriate entry in the General Fund is to debit Expenditures for the billed amount and credit a liability to the Internal Service Fund (an interfund payable). This reflects that the General Fund has consumed a service and owes the ISF for it. The other options don’t fit the situation: a debit to Interfund Transfers would treat it as a transfer, not a service expense; a credit to Expenditures would decrease the General Fund’s expenses; and a credit to the Internal Service Fund would not correctly represent the General Fund’s obligation to pay for the service.

When a fund uses services from the internal service fund, the General Fund records the cost as an expenditure. The appropriate entry in the General Fund is to debit Expenditures for the billed amount and credit a liability to the Internal Service Fund (an interfund payable). This reflects that the General Fund has consumed a service and owes the ISF for it.

The other options don’t fit the situation: a debit to Interfund Transfers would treat it as a transfer, not a service expense; a credit to Expenditures would decrease the General Fund’s expenses; and a credit to the Internal Service Fund would not correctly represent the General Fund’s obligation to pay for the service.