Question

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?

1) A debit to the Electric Expense account and a credit to the Cash account
2) A debit to the Electric Expense account and a credit to the Accounts Payable account
3) A debit to the Electric Expense account and a credit to the Electric Utility Revenue account
4) A debit to the Electric Expense account and a credit to the Due to Electric Utility account

Answer 1

The correct journal entry to record the transaction would be a debit to the Electric Expense account and a credit to the Electric Utility Revenue account.

Step-by-step explanation:

The correct journal entry to record the transaction would be: A debit to the Electric Expense account and a credit to the Electric Utility Revenue account.

When the General Fund uses electricity provided by the city-owned electric utility, it incurs an expense in the form of the Electric Expense account. At the same time, the city-owned electric utility earns revenue from providing electricity, which is recorded as a credit in the Electric Utility Revenue account.