Which statement is FALSE concerning proprietary fund debt?

A proprietary fund refers to a type of fund used in governmental accounting that operates much like a business, focusing on self-sustaining activities. When considering the nature of proprietary fund debt, the correct choice illustrates an important accounting principle.

In proprietary fund accounting, general obligation debt — which is secured by the full faith and credit of the issuing government — is not reported as proprietary fund debt. This type of debt belongs to the governmental activities and not the proprietary fund itself, thus supporting the statement that general obligation debt is never reported as proprietary fund debt.

Furthermore, it is accurate that a proprietary fund should not report contingent liability debt because such liabilities depend on future events and may not be settled in the future. As such, they wouldn't be reflected in the current liabilities of the proprietary fund.

While one might think that all debt related to a proprietary fund would be duly reported in that fund, it is crucial to clarify that not all debt linked to the proprietary fund is reported therein. For instance, obligations like general obligation debts should be excluded from such reporting and instead recorded in governmental activities.

Thus, the assertion that all debt related to a proprietary fund should be reported in said fund is indeed false, underscoring the importance of correctly categorizing debt according to