Question

In Fulbright County, the Culture and Recreation Department constructed a library in one of the county's high-growth areas. The construction was funded by a number of sources. Below is selected information related to the Library Capital Project Fund. All activity related to the library construction occurred within the current fiscal year. The county operates on a calendar-year basis.

The Library Special Revenue Fund transferred $250,000 for use in construction of the library.
a. Debit: Library Capital Project Fund $250,000; Credit: Library Special Revenue Fund $250,000

b. Debit: Library Special Revenue Fund $250,000; Credit: Library Capital Project Fund $250,000

c. Debit: Cash $250,000; Credit: Library Capital Project Fund $250,000

d. Debit: Library Capital Project Fund $250,000; Credit: Cash $250,000

Answer 1

The correct journal entry to record the transfer of $250,000 from the Library Special Revenue Fund to the Library Capital Project Fund for library construction is a debit to the Library Capital Project Fund and a credit to the Library Special Revenue Fund.

Step-by-step explanation:

The question presented relates to the accounting entry that should be recorded for a transfer of funds between two funds within Fulbright County’s governmental accounting system. In this specific case, the Library Special Revenue Fund transferred $250,000 to the Library Capital Project Fund for the construction of a new library. The correct journal entry to record this transaction would be option b:

Debit: Library Capital Project Fund $250,000
Credit: Library Special Revenue Fund $250,000

This journal entry is necessary because the funds are moving from one part of the government entity to another, rather than coming from an external source. When the Library Capital Project Fund receives the money, it is an increase in financial resources and would be debited. Conversely, the Library Special Revenue Fund's balance would decrease, indicating the need for a credit.