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CPASTONE
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Joined: 12 Jul 2010
Online Status: Offline
Posts: 95

Posted: 23 Jul 2010 at 18:58 \| IP Logged

Should inter fund transfer be reported as a separate line item in statement of revenues and expenses in Internal service funds? Becker clearly mentions inter fund transfers are shown separately for enterprise funds.
Now what confuses me further is the following question

Gem City's internal service fund received $50,000 cash from the general fund to capitalize this fund. This
$50,000 should be reported in Gem's internal service fund as a credit to:
a. Revenues.
b. Transfers.
c. Accounts payable.
d. Contributed capital.

Choice "b" is correct. The $50,000 non-reciprocal transfer would be reported in the internal service fund as a credit to "transfers."

My question is why is it not a revenue.

Now again look at following question

Which of the following does not affect an internal service fund's change in net assets?
a. Depreciation expense on its fixed assets.
b. Interfund transfers in.
c. Interfund transfers out.
d. Due from other funds.

CPA-01054 Explanation
Choice "d" is correct. Due from other funds appears on the balance sheet. They are not a component of
changes in net assets.
Choice "a" is incorrect. The internal service fund is a proprietary fund and recognizes depreciation
expense.
Choice "b" is incorrect. Interfund transfers in are additions to gross revenues in the internal service fund. Interfund transfers affect the results of operations.
Choice "c" is incorrect. Interfund transfers out are deductions from gross revenues in the internal service fund. Interfund transfers affect the results of operations.

So what follows from explanation in b and c is that it is part of gross revenue.

last but not the least can it be reported under other financing resources? My guess is no we do not have other financing resources category for Proprietary fund. I have come across the first question posted by someone else but choice b. there is other financing source.

Pls conclude.

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1tryCPA
Major Contributor

Joined: 27 Jun 2010
Online Status: Offline
Posts: 337

Posted: 23 Jul 2010 at 21:20 \| IP Logged

Other financial sources and other financial uses are accounts used only for governmental funds.
For ISF, it's transfers. They are reported in the statement of revenues, expenses, and changes in net assets, but it's not revenues. Yes, those transfers are additions to revenues and deductions from them but they are not revenues.

If it's a grant, then, it would be revenue.
Hope it makes some sense

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CPASTONE
Contributor

Joined: 12 Jul 2010
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Posts: 95

Posted: 24 Jul 2010 at 00:18 \| IP Logged

It does make sense. Thanks !

1tryCPA wrote:

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