Enterprise funds are a type of proprietary fund used by governments to account for operations that are financed and operated in a manner similar to private business enterprises. These include activities like water, sewer, and electricity utilities, where user fees or charges for services are the primary revenue source.
In this case, a water utility charging users is best accounted for using an enterprise fund.
Relevant References:
GASB Codification Section 1300 – Fund Types
GASB Statement No. 34 – Fund Classification
GFOA Best Practices – Utility and Enterprise Fund Accounting
Answer: D. enterprise fund
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