Question

Having been told repeatedly during his many years of service that depreciation was charged “in order to provide for the replacement of capital assets,” a member of a government’s electric utility (Enterprise Fund) board of directors was visibly upset upon being advised by the controller that it would be necessary for the utility to go deeply in debt “in order to replace some of our capital assets.” “How can it be true,” he asks, “that we have operated profitably each year, have an $850,000 Net Position balance and total Accumulated Depreciation account balances of $6,000,000, have never made transfers to the General Fund, and yet have cash and investments totaling only $100,000?” What is your response?



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  • CreatedOctober 25, 2014
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