What is the main objective of capital projects funds?

The primary objective of capital projects funds is to account for resources that are specifically restricted for the construction or acquisition of significant fixed assets. These funds are typically utilized by governmental entities to manage financial resources earmarked for long-term capital expenditures, such as buildings, infrastructure, and other large-scale projects. By maintaining separate accounting for these resources, the capital projects fund provides transparency and accountability regarding how funds are allocated and spent on significant developmental initiatives.

This focused tracking allows governments to ensure that specific funding sources, such as bonds or grants, are properly utilized for their intended purposes, thereby supporting effective financial management. It ensures that there is a clear distinction between funding for capital projects and other operating expenditures, which are typically managed through general funds. The correct choice reflects this essential purpose of capital projects funds in public sector accounting.