A state collects sales taxes not only for itself,but also on behalf of all cities within the state.What type of fund should the state use to account for the sales taxes held for the cities?
A)Private Purpose Trust Fund
B)Agency Fund
C)Special Revenue Fund
D)Investment Trust Fund

Question

Quizplus · Accepted Answer

An Agency Fund is used to account for assets held by a government entity in a trustee capacity for other government entities or individuals. In this case, the state is collecting sales taxes on behalf of the cities, making it an appropriate fund type for the purpose. Private Purpose Trust Fund is used to account for assets held in trust for specific beneficiaries, Special Revenue Fund is used to account for specific revenue sources that are restricted to certain programs or projects, and Investment Trust Fund is used to account for assets held in a trustee capacity for external parties, such as pension funds.

A State Collects Sales Taxes Not Only for Itself,but Also