Compare special revenue funds and capital projects funds.

• A. Special revenue funds account for restricted revenues for specific programs; capital projects funds for capital spending and projects.
• B. Special revenue funds are for debt service; capital projects funds are for operating expenses.
• C. Special revenue funds hold all government funds; capital projects funds are for private sector projects.
• D. Special revenue funds are for general fund operations; capital projects funds for endowments.

Answer: (A)

In governmental fund accounting, the purpose of each fund is the key idea. Special revenue funds exist to account for revenues that are legally restricted or committed to financing a specific program or function other than capital projects or debt service. They ensure that money raised for that particular program is spent only on it, such as a grant or tax revenue restricted to street maintenance or instructional programs.

Capital projects funds, on the other hand, are used to account for financial resources that will be used for the acquisition or construction of major capital facilities or infrastructure. They track the funding and the costs of long-term capital projects, and the asset often becomes part of the government’s fixed assets once completed.

So the best description is that special revenue funds manage restricted revenues for specific programs, while capital projects funds handle resources dedicated to capital spending and projects.

The other statements mix up the purposes—for example, debt service or operating expenses belong to other fund types; general funds or endowments aren’t what capital projects or special revenue funds are designed to manage.