Explain the reporting requirements for internal service funds and enterprise funds. Internal service funds and enterprise funds are both proprietary funds, so why do their reporting requirements differ?
What will be an ideal response?
Internal service funds and enterprise funds are presented in three proprietary fund financial statements-a statement of revenues, expenses and changes in fund net position; a statement of net position; and a statement of cash flows. Those enterprise funds considered to be major funds are presented in separate columns of the proprietary fund financial statements, with non-major enterprise funds aggregated in an Other Enterprise Funds column. All internal service funds are aggregated and reported in a single column on the fund statements. At the government-wide level the internal service funds balances are essentially collapsed into the Government Activities column of the government-wide statements. Enterprise funds are considered business-type activities and are reported in the Business-type Activities column of the government-wide statements.
Internal service funds and enterprise funds are both proprietary funds and are presented as such in the funds financial statements. However, since the transactions of internal service funds primarily involve sales of goods or services to the General Fund and other funds that compose the governmental activities of a government, their financial balances are included in a single column of the proprietary fund financial statements and with governmental activities (rather than business-type activities) at the government-wide level.
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