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What is the difference between transfers and other financing sources?
Gem City’s internal service fund received $50,000 cash from the general fund that does not need to be repaid. This should be reported in Gem’s internal service fund as a credit to:
A. revenues.
B. other financing sources.
C. accounts payable.
D. transfers.
Answer D. Inflows of assets from other funds without a requirement for repayment are considered interfund transfers. In proprietary funds (which include internal service funds), transfers should be reported separately after nonoperating revenues and expenses in the statement of revenues, expenses and changes in fund net position. An interfund transfer to/from a governmental fund should be reported as “other financing sources or uses” in the governmental fund.
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