Which fund type would be appropriate for a government receiving revenue restricted to specific program expenses?

A Special Revenue Fund is the appropriate choice for a government receiving revenue that is restricted to specific program expenses. This fund type is designed to account for the proceeds of specific revenue sources that are legally restricted to expenditures for particular purposes. The use of a Special Revenue Fund ensures that the resources are used in alignment with the restrictions placed upon them, providing a clear and accountable framework for managing funds dedicated to specific programs.

For instance, if a government receives grants or taxes earmarked for education or public health initiatives, those revenues would be recorded in a Special Revenue Fund to ensure compliance with the stipulations attached to their use. This separate fund structure distinguishes these revenues and expenditures from general operating resources, allowing for better financial reporting and transparency.

In contrast, a General Fund is utilized for the ordinary operations of the government and does not have restrictions on revenue use. An Enterprise Fund is meant for activities that are operated in a manner similar to private businesses, focusing on self-sustaining operations. An Agency Fund is used to account for resources held by a government in a custodial capacity, so it is not suitable for funds that are intended for specific programs. Thus, the Special Revenue Fund is uniquely designed to meet the needs of revenue that has particular limitations tied to its expenditure