On the due date for a bond interest and principal payment, the debt service fund journal entry (or entries) will include:

• A. A debit to Expenditures—Bond Interest.
• B. A credit to Expenditures—Bond Interest.
• C. A debit to Revenues—Interest.
• D. A credit to Cash.

Answer: (A)

On the due date, the debt service fund records the outflow for debt service as an expenditure. For the interest portion, the proper entry debits Expenditures—Bond Interest to reflect the cost of servicing the debt and credits Cash to show the cash payment leaving the fund. This aligns with governmental fund accounting, where outflows are recognized as expenditures when resources are disbursed. A credit to Expenditures—Bond Interest would opposite the normal direction for an expenditure and is not correct. No revenue account should be involved for this payment, so a debit to Revenues—Interest isn’t appropriate. Simply creditting Cash would not record the associated expenditure. (In practice, a separate entry would debit Expenditures—Bond Principal and credit Cash for the principal portion.)