Which statement about debt service funds is true?

• A. A debt service fund records operating revenues and operating expenses.
• B. A debt service fund is used only for debt service activities related to general long-term liabilities.
• C. A debt service fund is used for capital project financing.
• D. A debt service fund consolidates the government's entire debt portfolio into a single fund.

Answer: (B)

Debt service funds are designed to accumulate resources and pay the principal and interest on general long-term debt. They do not handle operating revenues or expenses, nor are they used to finance capital projects or to lump all of the government's debt into one fund. By focusing strictly on debt service for general long-term liabilities, this type of fund aligns with its purpose in governmental accounting. The other statements describe activities outside that scope—operating activities, capital projects financing, or aggregating the entire debt portfolio—so they aren’t correct.