Under which of the following circumstances must an Enterprise Fund be used?
A)when its activities are partially financed with advances from the general fund
B)when its activities are financed with debt that is secured solely by the full faith and credit of the related primary government
C)when its activities are financed with debt that is secured solely by a pledge of the net revenues from the charges made by the activity
D)when its activities are financed in such a way that all costs except capital costs are covered.

Question

Quizplus · Accepted Answer

An Enterprise Fund must be used when its activities are financed with debt that is secured solely by a pledge of the net revenues from the charges made by the activity. This is because Enterprise Funds are used to account for activities where fees charged to customers are the primary source of revenue, and therefore the debt must be backed by those revenues as collateral. Choices A and B do not require the use of an Enterprise Fund, and Choice D does not relate to financing criteria for Enterprise Funds.

Under Which of the Following Circumstances Must an Enterprise Fund