Question

In an Internal Service Fund, the expectation is that:_____.A. Each year's revenues should equal each year's expenses because the revenues are simply an allocation of that year's expenses. B. Expenses will exceed revenues because depreciation expense is reported in an Internal Service Fund. C. Accumulated revenues over time should approximately equal the accumulated expenses over time. D. Each year's revenues should equal each year's expenditures because the revenues are simply an allocation of that year's expenditures.E. None of these answers is correct.

Answer 1

Answer:

In an Internal Service Fund, the expectation is that:_____.

A. Each year's revenues should equal each year's expenses because the revenues are simply an allocation of that year's expenses.

Explanation:

There are two proprietary funds used in governmental accounting.  One is the internal service fund.  The other one is the enterprise fund.  The internal service fund tracks the goods or services rendered by a service department to other governmental departments.  It is established on a cost reimbursement basis.  This is why the expenses for the year are expected to equal the annual revenue.