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 Bonds Payable.
B) A debit to Interfund Transfers Out.
C) A debit to Expenditures-Bond Interest.
D) A debit to Interest Expense.

Question

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 Bonds Payable.
B) A debit to Interfund Transfers Out.
C) A debit to Expenditures-Bond Interest.
D) A debit to Interest Expense.

Quizplus · Accepted Answer

On the due date for a bond interest and principal payment, the debt service fund will debit Expenditures-Bond Interest to record the payment of interest due on the bonds. This entry represents an outflow of financial resources from the debt service fund. The fund will also credit Cash for the payment made. Bonds Payable and Interest Expense are not recorded in the debt service fund as they pertain to the governmental activities or business-type activities, and not to the fiduciary activities of the debt service fund. Interfund Transfers Out may be recorded in the debt service fund, but would not be applicable for a bond payment.

On the Due Date for a Bond Interest and Principal