Why Are Special Revenue Funds Important?

 

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In the field of accounting, there is an understanding of revenues that are earned, and these are estimable reasonably with respect to the concept of accrual. It is important to use good sense of judgment while determining the materiality of revenues that are gathered in an existing period of accounting as well as the manner of application of the accounting principles.

When expenses are incurred, they are recognized and are offset against related revenues with the help of matching principle. Special revenue fund offers an additional level of transparency and accountability to taxpayers and ensure that their tax payment is being used for an intended objective. Know about the importance of this type of fund.

Necessary for specific purposes

This kind of fund is actually an account created by a government for the collection of revenues which need to be used for a particular project. Government entities use it for accumulating proceeds from specific sources of revenues, the use of which is limited to particular activities or purposes.

It is important to note here that only revenues which are assigned specifically are allocated to this type of fund. Assigned resources are the unassigned or unrestricted proceeds - the usage of which is limited by the intention of the government.

For financing small scale projects

This kind of fund is established for funding and operating dedicated small scale projects. It can be used for financing:

  • Town plazas
  • Beaches
  • Libraries
  • Parks etc.

Establishing transparency and accountability

The main reason why this kind of a fund is established is to demonstrate transparency and accountability while tracking the inflow and outflow of cash for particular purposes. With the help of such a fund, it is ensured by the government that funds that are allocated specially are always accountable to the taxpayer.

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