Question

The General Fund gives assets to the internal service fund that the internal service fund is not expected to repay. The transaction would be recorded as an interfund transfer.

True
False

Answer 1

The transaction described is an interfund transfer because the internal service fund is not expected to repay the General Fund, indicating a nonreciprocal transfer within the same government entity.

Step-by-step explanation:

When the General Fund gives assets to the internal service fund that the internal service fund is not expected to repay, the transaction is indeed considered an interfund transfer. This type of transaction reflects a nonreciprocal transfer in governmental accounting. Nonreciprocal transfers include contributions and donations that are made without the expectation of equal value returned, and when these transfers occur between different funds within the same government entity, they are recorded as interfund transfers.