Which fund type would typically be used to account for construction of a major public facility?

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

Answer: (D)

In governmental accounting, funds are separated by the purpose of the resources. The Capital Projects Fund is the one set up to accumulate and track resources dedicated to constructing or acquiring major capital facilities. It handles the inflows from bond proceeds, grants, or other restricted sources and the expenditures of those resources specifically for a capital project. This long-term, project-focused activity is why a Capital Projects Fund is used for building a major public facility.

General Fund handles day-to-day operations and services, Debt Service Fund is for paying debt principal and interest, and Special Revenue Fund accounts for restricted resources for purposes other than capital projects. A construction project fits best in the Capital Projects Fund because it represents a major capital asset project with dedicated funding sources and long-term timing, and once completed, the asset is reflected in the government-wide statements while debt service moves into its respective fund.