How does a special revenue fund differ from a general fund?

A special revenue fund is specifically designed to account for revenues that are legally restricted for specific purposes. This means that the funds collected must be utilized in accordance with the stipulations set forth by legislation, grants, or other governing agreements. As such, this type of fund allows for better tracking and management of these funds to ensure compliance with legal requirements and to enhance accountability within governmental or nonprofit entities.

In contrast, the general fund is utilized for general operations and does not have such restriction on its revenue sources or expenditures. This allows a government entity or nonprofit organization to use the general fund for a wide array of purposes, providing greater flexibility in addressing different operational needs. The legal restrictions that apply to special revenue funds do not limit the general fund in the same way, showcasing the distinct functions these two types of funds serve within financial management and reporting.