Where would the $5,000,000 endowment principal be recorded?

• A. General Fund
• B. Special Revenue Fund
• C. Permanent Fund
• D. Capital Projects Fund

Answer: (C)

Endowment principal is resources that the government must preserve in perpetuity, so it belongs in a permanent fund. In GASB accounting, permanent funds are the vehicle for resources whose principal cannot be spent; only the income generated from that principal (and any donor-restricted earnings) is available for appropriation to support programs. Recording the $5,000,000 principal in the Permanent Fund shows it as nonspendable, reflecting its preservation requirement. The other fund types serve different purposes: the General Fund covers everyday operations, Special Revenue Fund holds resources for specific restricted purposes that aren’t permanently preserved, and the Capital Projects Fund accounts for funds for major capital assets. Therefore, the principal would be recorded in the Permanent Fund.