What should be the accounting entry for the issuance of $100,000 of bonds in the general fund?

When bonds are issued in a governmental fund, such as the general fund, it is important to recognize the nature of the transaction and how it is recorded in terms of public sector accounting principles. The correct accounting entry reflects the inflow of cash from the issuance of the bonds and recognizes the resulting financial liability.

In this instance, issuing $100,000 of bonds results in an increase in cash, which is recorded by debiting cash for that amount. Since the general fund is a governmental fund, the proceeds from bond issuance are classified as other financing sources rather than revenue. Therefore, to accurately reflect the financial impact of this transaction, a credit is made to "other financing sources—proceeds from bonds" for $100,000. This properly accounts for the increase in cash as well as the requirement to acknowledge that the government has incurred a liability to pay back those bonds in the future.

Overall, this accounting entry aligns with governmental accounting standards, which differentiate between revenue and other financing sources, emphasizing the borrowing nature of bond issuances. This is crucial for understanding the funding operations of governmental entities correctly.