What are the main types of governmental funds recognized by GASB?

The correct response identifies the main types of governmental funds as recognized by the Governmental Accounting Standards Board (GASB). Governmental funds are primarily established for the purpose of carrying out government operations and providing services to the public. The five main types include:

1. General Fund: This is the primary operating fund of a government entity. It accounts for all activities not accounted for in other funds and is used for general governmental operations.

2. Special Revenue Fund: This type of fund is used to account for specific revenues that are restricted or committed to specific activities or purposes, such as fuel taxes designated for road maintenance.

3. Capital Projects Fund: This fund is utilized for financial resources that are specifically assigned for capital improvements or infrastructure development and maintenance. It encompasses activities related to the acquisition or construction of capital assets.

4. Debt Service Fund: This fund is established to account for the accumulation of resources for and the payment of long-term debt principal and interest. It ensures that the government can meet its debt obligations.

5. Permanent Fund: Permanent funds are used to report resources that are legally restricted to the extent that only earnings, and not the principal, may be used to support the government’s programs.