When a supplies internal service fund records a billing to the General Fund, the journal entry in the internal service fund will include which of the following?

• A. Debit Expenditures
• B. Debit Interfund Transfers
• C. Credit Interfund Payable
• D. Debit Due from General Fund

Answer: (D)

When an internal service fund bills another fund, the provider recognizes an interfund receivable from the customer fund. This records that the General Fund owes the internal service fund for services provided, and it increases the provider’s assets while recognizing revenue from charges to other funds.

Therefore, the journal entry in the internal service fund includes a debit to the asset account reflecting the amount billed: Due from General Fund. The corresponding credit would be to billings/revenue for interfund services, but the key asset increase here is the receivable from the General Fund.

Debiting Expenditures would not fit because expenditures are not being incurred by the service provider to reflect this billing. Debiting Interfund Transfers isn’t appropriate for the billings of services between funds. Crediting Interfund Payable would imply the internal service fund owes money, which reverses the actual relationship—the General Fund owes the internal service fund.