Final answer:
The statement is false; Debt Service funds use the modified accrual basis of accounting, which is different from the full accrual basis that recognizes revenues when earned and expenses when incurred.
Step-by-step explanation:
The statement that Debt Service funds use the full accrual basis of accounting is false. Debt Service funds, used by governmental entities to account for the repayment of debt, operate under the modified accrual basis of accounting. The modified accrual basis is different from the full accrual basis in that it recognizes revenue when they become available and measurable, rather than when they are earned. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable.
Under the full accrual basis, which is used by for-profit businesses and also by governmental entities for proprietary and fiduciary funds, revenues are recognized when earned and expenses when incurred, regardless of when cash is received or paid. By contrast, Debt Service funds are considered governmental funds and adhere to the modified accrual accounting principles.