Chapter 18, Problem 18.1Q

In what circumstances would a governmental unit use a special revenue fund rather than a general fund?

To determine

Special revenue funds: when governmental resources are restricted for specific purposes such as development of state highway system or maintenance of school system or libraries and the revenue for this is often taken from special taxes or government grants special revenue funds used to account for resources.

General funds: it is the fund created by government of its operational requirements such as payment of salaries purchase of supplies and goods.

To explain:what are the circumstances in which government uses special revenue fund rather than general funds.

Answer to Problem 18.1Q

Special revenue fund is used instead of general fund when government grants or special tax levies are restricted for specific purposes.

Explanation of Solution

The above answer can be explained as the general funds are used for operational requirements, whereas special revenue funds are from government grants or special taxes for specific purposes hence it is restricted for the purpose for which it is granted or collected, in this situation special revenue funds are used.