The sale of revenue bonds by a water utility fund would be recorded in which fund and as what?

• A. In a fiduciary fund as a liability.
• B. In a governmental fund as revenue.
• C. In an enterprise fund as a liability.
• D. In a capital projects fund as an asset.

Answer: (C)

In GASB terms, the water utility is a business‑type activity, so its financial activities are reported in an enterprise fund. The sale of revenue bonds for that utility is a financing activity that raises cash but creates a long‑term obligation of the enterprise fund. Therefore, the proceeds would be recorded as assets in the enterprise fund, and the corresponding obligation would be recorded as a long‑term liability (bonds payable) of that fund. Fiduciary funds and governmental funds don’t carry enterprise‑level debt, and capital projects funds aren’t used to reflect the ongoing obligations of a utility’s operations.