Debt service funds are used to account for which of the following?

• A. Operating expenses of the government.
• B. Revenue collection.
• C. Capital acquisitions.
• D. Payment of principal and interest on general long-term debt.

Answer: (D)

Debt service funds are used to account for the payments of principal and interest on general long-term debt. The purpose is to isolate and earmark resources specifically for debt obligations so they are available when due, ensuring timely debt payments without mingling with ongoing operating or capital spending. These funds are typically funded from restricted taxes or transfers designated for debt service and are not used to cover operating expenses, collect revenue, or acquire capital assets, which are handled in other fund types. When debt service is due, the money in the debt service fund is used to pay the debt holders.