If Parks Department is a governmental fund, which account should the Parks Department use to record billings from the central motor pool's internal service fund?

• A. Expenditures
• B. Revenues and Expenditures
• C. Other Financing Sources
• D. Interfund Transfers In

Answer: (A)

When a governmental fund uses a service provided by another fund’s internal service fund, the recipient fund records the cost as an expenditure. The central motor pool is charging for its services, so the Parks Department (as the recipient fund) shows the amount billed as an expenditure, reflecting the consumption of a service and the resulting use of resources. Revenues are not recognized in the recipient fund for interfund service charges, since those charges are not external earnings. Transfers and other financing sources are for non-operating movements, not for routine service billings. In practice, there would be a related interfund payable to the motor pool (and an interfund receivable in the provider), but the Parks Department’s entry for the billing itself is an expenditure.