Cash dedicated by the federal government for highway maintenance would be carried in which fund?

• A. General Fund
• B. Capital Projects Fund
• C. Debt Service Fund
• D. Special Revenue Fund

Answer: (D)

Resources dedicated by the federal government for highway maintenance are restricted to a specific program and are intended to be used only for that ongoing activity. In government fund accounting, Special Revenue Funds are used to hold revenues that are externally restricted or designated for a particular purpose other than capital projects or debt service. Highway maintenance fits this pattern because the funds are earmarked specifically for that ongoing transportation program, not for general operating expenses, constructing capital assets, or paying debt. The General Fund would cover general operations, the Capital Projects Fund is for major capital acquisitions, and the Debt Service Fund is for accumulating resources to pay long-term debt. So, the appropriate place for these dedicated funds is the Special Revenue Fund.