A transfer from the General Fund to the Capital Projects Fund to partially finance a capital project would be recorded by the Capital Projects Fund as which of the following?

• A. Other financing source
• B. Revenue
• C. Interfund loan
• D. Expenditure

Answer: (A)

In governmental fund accounting, transfers between funds are financing activities, not revenues or expenditures. When the General Fund sends resources to the Capital Projects Fund to help finance a capital project, the Capital Projects Fund shows the inflow as an other financing source (an interfund transfer in). This reflects that the money comes from another fund and is being used to finance a capital project, not earned as revenue or spent as an expenditure. If there were an obligation to repay, it would be an interfund loan; since this is a straight transfer, it is classified as an other financing source. The General Fund would record the corresponding outflow as an other financing use.