A City's Comptroller Is Distraught Because Depreciation Cannot Be Recorded

question 32

Essay

A city's comptroller is distraught because depreciation cannot be recorded in a general fund. Moreover, for political reasons the city council never permits the general fund to have a substantial surplus balance. As a consequence the city is unable to "save" resources to replace aging capital assets. The comptroller has heard that it is possible indirectly to charge depreciation in a general fund by transferring capital assets to an internal service fund and correspondingly to build up a cash reserve to replace the capital assets. Is the comptroller correct? If so, explain how an internal service fund can be used to charge depreciation in the general fund and thereby create a cash reserve of what would otherwise be general fund assets.

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Definitions:

Registered

A formal process of enlisting or recording names or items in a list, database, or system for official purposes.

Campus

A term used to describe the physical grounds and buildings where a college or university is located.

Placebo Effects

The phenomenon in which a person experiences a perceived improvement in condition due to their belief in the treatment's efficacy, despite it having no therapeutic effect.

Anxiety Levels

Refer to the intensity of feelings of worry, nervousness, or unease, typically about an imminent event or something with an uncertain outcome.