GASB and FASAB Standards Practice Test

In government-wide financial statements, the government reports activities on an accrual basis and combines funds to show the overall net position. Internal service funds are internal support operations that primarily serve other parts of the government rather than external customers. Because of that, their assets, liabilities, and results belong with the governmental activities in the government-wide presentation. The interfund charges between internal service funds and other government funds are eliminated in the consolidation, but the net effects are shown within the governmental activities column.

Generally, internal service funds are not placed with enterprise funds (which represent business-type activities serving external customers), nor with fiduciary activities, and they are not reduced to disclosures only.