Which would be considered an internal exchange transaction?

• A. The General Fund transfers $9,000 to Central Supplies Fund for supplies it received from Central Supplies
• B. A grant from one fund to another
• C. Interfund loan with interest charged
• D. Donations from residents

Answer: (A)

An internal exchange transaction occurs when two funds within the government swap goods or services for a charge that reflects the cost, so the exchange has value flow in both directions between funds. Under GASB, the providing fund records revenue from the sale of services or goods, and the receiving fund records an expenditure or expense for those goods or services.

In the described scenario, one fund supplies goods to another fund and charges for them. The Central Supplies Fund provides the supplies, and the General Fund pays for them, reflecting the exchange of goods for a priced service. This fits the internal exchange pattern: a service provided and used between funds with appropriate interfund charging.

The other options do not represent internal exchanges. A grant from one fund to another is a transfer, not a charge-for-services exchange. An interfund loan with interest is a loan transaction, not an exchange of goods or services. Donations from residents are outside the government’s internal fund-to-fund exchanges.