A city government collects local option sales taxes legally restricted to pay for the construction of a new courthouse. Which fund should account for the receipt of the sales taxes?
A) Special revenue fund
B) Capital projects fund
C) Private-purpose trust fund
D) General fund

Question

Quizplus · Accepted Answer

The local option sales taxes collected for the construction of a new courthouse are legally restricted for that specific purpose, so they should be accounted for in a capital projects fund. This fund is used to accumulate resources and expenditures for the acquisition or construction of major capital assets, such as buildings like a new courthouse. Special revenue funds are used for specific revenue sources that are legally restricted to certain purposes, but they are not used for capital projects. Private-purpose trust funds are used for resources held in trust for specific beneficiaries, and general funds are used for day-to-day operations and are not appropriate for accounting for the receipt of sales taxes that are legally restricted for a specific capital project.

A City Government Collects Local Option Sales Taxes Legally Restricted