Which fund would typically record the payments for both principal and interest on long-term debt?

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

Answer: (A)

Debt service payments on long-term debt are typically handled in a dedicated Debt Service Fund. This fund is set up specifically to accumulate resources and disburse both principal and interest when due, keeping debt obligations separate from operating and capital activity. Transfers or dedicated revenues build the fund, and when payments are made, the outflows cover both principal retirement and interest expense. The General Fund handles day-to-day operating costs, the Capital Projects Fund tracks construction of capital assets, and the Special Revenue Fund accounts for revenues restricted to particular purposes. So, the Debt Service Fund is the appropriate place for recording those debt payments.