Question

The voters of the city passed an ordinance to increase their sales tax by _ percent. The proceeds of the sales tax are to be used for culture and recreation. In the governmental activities journal, how would the _ percent sales tax revenue be recorded?

a. General Revenue-Sales Tax.
b. Program Revenue-Culture and Recreation-Operating Grants and Contributions.
c. General Revenue-Culture and Recreation-Sales Tax.
d. Program RevenueÑCulture and RecreationÑSales Tax.

Answer 1

The _ percent sales tax revenue earmarked for culture and recreation should be recorded as Program Revenue-Culture and Recreation-Operating Grants and Contributions in the governmental activities journal.

Step-by-step explanation:

When a city passes an ordinance to increase their sales tax for a specific purpose such as culture and recreation, the accounting recording of this tax revenue would reflect its intended use. Given that the sales tax revenue will be dedicated specifically for culture and recreation rather than for general city operations, it should be recorded as b. Program Revenue-Culture and Recreation-Operating Grants and Contributions. It represents a form of revenue that is restricted for a particular program or purpose, distinguishing it from general funding sources.