The liability for general obligation bonds issued for the benefit of a governmentally-owned electric utility and serviced by its earnings should be recorded in:

• A. General Fund
• B. Enterprise Fund
• C. Internal Service Fund
• D. Special Revenue Fund

Answer: (B)

When a government-owned electric utility is run as a business‑type activity, the accounting is in an enterprise fund. Enterprise funds are used for activities that are financed primarily by user charges and are intended to operate like a private business. If the general obligation bonds are issued to benefit the utility and the debt service is paid from the utility’s earnings, the related liability belongs in the enterprise fund because it directly supports the utility’s operations and finances itself through its own revenues. General Fund, Internal Service Fund, and Special Revenue Fund are not appropriate because they handle governmental operations funded by taxes or fees for internal services or specific non-enterprise purposes, not a self‑supporting utility. In government-wide statements, the obligation would appear as a long‑term liability of the government, but at the fund level the liability is recorded in the enterprise fund.