Which statement best describes a typical use of a capital projects fund?

• A. Dedicated to managing operating expenditures for police and fire services.
• B. Used to account for routine maintenance.
• C. Used to account for major capital projects.
• D. Used to record debt service payments.

Answer: (C)

In governmental accounting, a capital projects fund is used to account for financial resources that will be used for the acquisition or construction of major capital facilities or other major capital outlays. It often holds proceeds from long-term debt or grants restricted for capital projects, and the spending tracked in this fund represents the capital expenditures of those projects until they become part of the city or state’s fixed assets.

This fits the statement that describes its typical use because it focuses on funding and tracking large, one-time or phased capital initiatives rather than ongoing operations. It is not the place for operating expenditures like routine policing or fire services, nor for routine maintenance, which belong in operating or maintenance-focused funds. Debt service payments have their own fund—the debt service fund—where resources are set aside to pay interest and principal on long-term debt, not for financing new capital projects.

So the capital projects fund is best described as the account used for major capital projects.