Which fund type is used when a government receives a restricted grant and chooses not to include it in the general fund?

The correct answer is the Special Revenue Fund because this type of fund is specifically designed to account for the proceeds of specific revenue sources that are restricted or committed for particular purposes. When a government receives a restricted grant, those funds cannot be used for general government activities or expenses, hence they need to be tracked separately to ensure compliance with the grant's restrictions.

Using a Special Revenue Fund allows governments to segregate these restricted resources effectively, making it easier to monitor and report how the funds are spent in accordance with the terms of the grant. This ensures transparency and accountability, which are essential in governmental financial management.

In contrast, a General Fund encompasses all financial resources of the government that are not assigned to a specific purpose. An Enterprise Fund is used for activities that operate similarly to private businesses, funded primarily by user charges. An Investment Trust Fund accounts for the assets and related income of an investment pool that is sponsored by a government entity. These fund types do not fit the scenario where a restricted grant is received and necessitated separate accounting.