A city government collects local option sales taxes legally restricted to pay for the hiring of teachers for hearing impaired school children. 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 by the city government are legally restricted to pay for hiring teachers for hearing-impaired school children. This means that the government cannot use the funds for any other purpose. Therefore, the best fund to account for these receipts is the special revenue fund. Special revenue funds are used to account for and report on specific revenue sources that are restricted or committed to a specific purpose, such as the hiring of teachers for hearing-impaired school children.

A City Government Collects Local Option Sales Taxes Legally Restricted