Final answer:
The transfer of funds from the General Fund to the Debt Service Fund in December will decrease the General Fund's fund balance and increase the Debt Service Fund's fund balance, in preparation for a debt service payment in January.
Step-by-step explanation:
When a General Fund transfers funds to a Debt Service Fund in late December for a debt service payment that will be made in early January, the accounting treatment will affect the fund balance in December. The transfer is recorded as an other financing use in the General Fund and as an other financing source in the Debt Service Fund. Consequently, the fund balance of the General Fund will decrease due to the outflow of resources, while the fund balance of the Debt Service Fund will increase, reflecting the receipt of resources to make the upcoming debt service payment.