At inception of a lease for equipment, the capital projects fund would record which of the following as a credit?

• A. Other Financing Sources—Lease Agreement
• B. Lease Receivable
• C. Lease Expenditure
• D. Lease Revenue

Answer: (A)

In a capital projects fund, financing for a capital asset can come from sources that are not revenues—these are recorded as Other Financing Sources. When a lease is entered into to finance equipment, the inflow from that lease is treated as a financing source, not as revenue or a receivable. Therefore, at inception, the appropriate credit is to Other Financing Sources—Lease Agreement, reflecting the financing provided by the lease for the project. The other options would not fit the financing nature of the transaction: a lease receivable or lease revenue are not recognized by the capital projects fund at inception as a financing source, and a lease expenditure would represent an outlay, not the inflow of funds financing the project.