GASB and FASAB Standards Practice Test 2026 – Your All-in-One Guide to Mastering Accounting Standards!

Debt service funds are used to accumulate and hold current financial resources specifically for paying principal and interest on debt. Because they are governmental funds, their balance sheet shows liquid resources like cash and investments, and related receivables tied to the funding source for debt service. Equipment, on the other hand, is a capital asset representing a long-lived production resource owned by the government and would appear in the government’s capital assets or in a different fund that acquires assets. It is not part of a debt service fund’s balance sheet, which is focused on resources available to meet debt payments.