If a capital project is financed by general obligation bonds, the proceeds are typically recorded in which fund?

• A. General Fund
• B. Enterprise Fund
• C. Debt Service Fund
• D. Capital Projects Fund

Answer: (D)

Capital Projects Fund is used to account for financial resources dedicated to acquiring or constructing major capital facilities, including proceeds from general obligation bonds issued specifically to fund those projects. Recording the bond proceeds in this fund isolates the funding source for the capital project from day-to-day operations and from debt-service activities, making it clear how the capital asset is financed. The General Fund handles ongoing governmental operations, the Enterprise Fund covers business-type activities with user charges, and the Debt Service Fund accumulates resources to meet debt payments but does not typically hold the initial bond proceeds for financing the project. After the project progresses and expenditures are made, the accounting stays within the Capital Projects Fund for those costs, while debt service—payments of principal and interest—belongs to the Debt Service Fund.