Which fund would be used to account for resources provided by a federal grant that must be set aside for a specific program?

• A. General fund
• B. Special revenue fund
• C. Debt service fund
• D. Capital projects fund

Answer: (B)

When government resources are restricted to a specific program, they belong in a Special Revenue Fund. This fund type is used to account for revenues that are restricted or committed to a particular purpose other than capital projects or debt service. A federal grant that must be set aside for a specific program creates that kind of restriction, so recording the grant in a Special Revenue Fund allows the government to separately track both the restricted inflows and the program’s eligible expenditures.

The General Fund holds resources available for the government's day-to-day operations without restrictions. The Debt Service Fund is for accumulating resources to pay principal and interest on long-term debt, not for program-specific grants. The Capital Projects Fund is for resources restricted for the construction or acquisition of major capital facilities, which is a different category from a program-specific grant.