Which of the following properly portrays the components of net position for proprietary funds?

• A. Net investment in capital assets; Unrestricted; Current assets
• B. Unrestricted net position; Restricted; Net investment in capital assets
• C. Net investment in capital assets; Restricted; Unrestricted
• D. Restricted net position; Unrestricted; Net investment in capital assets

Answer: (C)

Proprietary funds present net position in three distinct components to show how much of the resources are tied up in capital assets, how much is restricted for specific purposes, and how much remains available without restrictions. Net investment in capital assets is the portion tied to capital assets financed with debt for those assets. It is calculated as the net of capital assets (net of depreciation) minus the outstanding debt attributed to acquiring, constructing, or upgrading those assets. The restricted component includes resources whose use is constrained by external agreements or laws—grants, debt covenants, or other restrictions—so those funds can’t be used for general operations. The unrestricted portion is everything else that isn’t restricted and isn’t tied up in capital assets, representing the resources available for day-to-day operations.

This framework explains why the proper portrayal is net investment in capital assets, restricted, and unrestricted. It avoids including current assets as a net position category, since current assets are assets on hand, not tagged net position components.