Question

Evaluating and assigning to appropriate funds

The City of Desert Foothills established the following activities after it was founded: General Fund, Governmental Activities, Enterprise Fund, Internal Service Fund, Enterprise Fund, and Permanent Fund. Assign the following transactions to the appropriate activity and explain why you assigned the transaction to the activity.

• Cash was transferred from the General Fund to establish a central duplicating Internal Service Fund in the amount of $40,000 in cash and $280,000 in equipment with accumulated depreciation of $90,000.
• The city’s General Fund was billed $125,000 for water and sewage by the Utility Fund. By the last day of the year, the $123,000 was paid on the utility bill.
• The Internal Service Fund billed the city’s general government function $18,400 for duplicating services and the city’s Utility Fund for $8,700 for services.
• A purchase order of $27,000 was created by the general government function for computer equipment.
• A payment voucher was approved for $26,400 upon receipt of the equipment and the payment was made.

Assignment: Assign the preceding transactions to the appropriate activity indicated below and explain why you assigned the transaction to the activity.

GF          General Fund

CPF        Capital Projects Fund

ISF          Internal Service Fund

PF           Permanent Fund

SRF         Special Revenue Fund (After-School Fund)

EF           Enterprise Fund

GA          Governmental Activities

Answer 1

S.NO	Particulars	Debit Amount (in $)	Credit Amount (in $)	Explanation
1)	Internal Service Fund (ISF) :			The ISF are established to recognize and account those activities which provides goods/services to other departments.
	Equipment	2,80,000
	Cash	40,000
	To Accumulated Depreciation		90,000
	To Interfund transfer in-from General Fund		3,20,000
	General Fund (GF) :			GF is a primary fund used to record all inflows and outflows which are not associated with special purpose funds
	Interfund transfer out - other financing uses	4,10,000
	Cash		4,10,000
2)	Enterprise Fund (EF) :			An Enterprise fund is a government fund that is self-supported and sells the goods/services to the public for a fee.
	Due from other Funds	1,25,000
	To Charges for Services		1,25,000
	Cash	1,23,000
	Due from other Funds		1,23,000
	General Fund (GF) :			Water & Sewage expenses are general public expenses are not associated with any special fund
	Expenditure-Water & Sewage	1,25,000
	To Due to utility funds/other funds		1,25,000
	Due to utility funds/other funds	1,23,000
	To Cash		1,23,000
	Governmental Activities (GA) :			GA are the general governmental activities and are financed through taxes, funds, etc.. They are concerned with activities involving health , education, sanitation, public safety etc
	Expenses - Water & Sewage	1,25,000
	To Internal balances		1,25,000
	Internal balances	1,23,000
	To Cash		1,23,000
3)	Internal Service Fund (ISF) :			The service is provided to other departments, hence classified under ISF.
	Due from other funds	27,100
	To Billing to departments		27,100
	Enterprise Fund (EF) :			The Admin services are services to the public that is self-supported by the government
	Expenses -Administrative services	8,700
	To Due from other funds		8,700
	General Fund (GF) :
	Expenses -duplicating services	18,400
	To Due to other funds		18,400
	Governmental activities :			The expenses are general Governmental activities as mentioned above and hence classified under GA.
	Internal balances	27,100
	To Revenue - charges for services		27,100
4)	General Fund :			GF is a primary fund used to record all inflows and outflows which are not associated with any special purpose funds
	Encumbrance	27,000
	To Encumbrances outstanding		27,000
	Encumbrances outstanding	26,400
	Encumbrances		26,400
	Expenditure	26,400
	To Vouchers Payable		26,400
	Vouchers payable	26,400
	To Cash		26,400
	Governmental activities :			The expenses are general Governmental activities as mentioned above and hence classified under GA.
	Equipment	26,400
	To Vouchers payable		26,400
	Vouchers payable	26,400
	To Cash		26,400