Which statement describes how capital assets used by an enterprise fund should be reported?

• A. In the enterprise fund and shown net of accumulated depreciation
• B. In the government-wide statements with depreciation
• C. In the general fund
• D. In the capital projects fund

Answer: (A)

Capital assets used by an enterprise fund are reported in the fund’s own financial statements and are shown net of accumulated depreciation. This reflects the enterprise fund’s full accrual basis: long‑lived assets used in providing services sit on the fund’s books, with depreciation recorded over time to allocate cost and reduce the asset’s carrying value. The depreciation expense appears in the fund’s statement of revenues, expenses, and changes in net position. Reporting these assets in the general fund or a capital projects fund would misplace them, and while government-wide statements also present capital assets, the fund‑level presentation for an enterprise fund shows the assets net of depreciation.