Question

The General Fund used electricity provided by the city-owned electric utility (an enterprise fund of the city). The governmental activities journal entry to record the transaction will include

a. A debit to Expenditures
b. No entry would be recorded since the transaction is between two funds of the same government.
c. a debit to Expenses
d. A debit to Internal Balances

Answer 1

The journal entry for the General Fund's use of electricity from the city's enterprise fund will include a debit to Expenses, as intra-government transactions are treated like third-party transactions.

Step-by-step explanation:

The governmental activities journal entry to record electricity used by the General Fund provided by the city-owned electric utility (an enterprise fund) will include a debit to Expenses. Even though the transaction occurs between two funds within the same government, activity between funds is treated as if they were separate entities. This ensures that all transactions are recorded and reported accurately. As such, the entry would reflect an expense for the General Fund and a corresponding increase in revenue for the enterprise fund which provided the utility service.