Which fund type would contain an enterprise fund and an internal service fund?

• A. Governmental funds
• B. Fiduciary funds
• C. Proprietary funds
• D. Not-for-profit funds

Answer: (C)

In government accounting, funds are organized into governmental, proprietary, and fiduciary categories. Proprietary funds are used for business-type activities and use accrual accounting. They include two main types: enterprise funds, which operate like private businesses and charge external users for goods or services; and internal service funds, which provide services to the government’s own departments or agencies on a cost-reimbursement basis and function like internal departments with internal customers. Because both enterprise funds and internal service funds fall under the umbrella of proprietary funds, the fund type that would contain both is proprietary funds.

For context, governmental funds focus on general governmental activities and use modified accrual accounting, while fiduciary funds hold resources as a trustee or agent for others and aren’t available to support the government’s own programs. Not-for-profit funds isn’t a standard GASB fund category in the way proprietary funds are.