 Use modified accrual, with one exception: Expenditures for interest and principal are generally recognized in period in which they are legally due  Budgetary accounting typically is used--except there is no need for encumbrance accounting since the debt service fund does not order goods or enter into contracts for services  For serial bonds, the amount budgeted for revenues or interfund transfers in is usually just what is needed that fiscal year for matured principal and interest.
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