The voters of the city passed an ordinance to increase their sales tax by ¼ percent. The proceeds of the sales tax are to be used for culture and recreation. In the governmental activities journal, how would the ¼ percent sales tax revenue be recorded?

• A. Sales Tax Revenue
• B. General Revenue—Sales Tax
• C. General Fund Revenue—Sales Tax
• D. Intergovernmental Revenue

Answer: (B)

In government-wide reporting, taxes such as sales taxes are considered general revenues. Even though the ordinance dedicates the proceeds to culture and recreation, the revenue source is still a tax, not an intergovernmental transfer or a fund-specific inflow. Therefore, the proper recording in the governmental activities journal is to recognize the cash received and credit a general revenue line labeled for the sales tax.

Practically, you would debit Cash and credit General Revenue—Sales Tax. This placement reflects that the sales tax is a general resource available to support government activities, with the specific use restricted to culture and recreation within the government’s funds, not altering its general-revenue nature in the government-wide statements.

Intergovernmental Revenue would be for resources from other governments, which this is not. General Fund Revenue—Sales Tax would pertain to fund-level reporting for the General Fund, not the government-wide statements. A simple Sales Tax Revenue label isn’t the standard government-wide presentation, which uses General Revenue—Sales Tax.