Which of the following funds would record depreciation of capital assets?
A) Special revenue fund.
B) Permanent fund.
C) Internal service fund.
D) Custodial fund.

Question

Quizplus · Accepted Answer

Internal service funds have the purpose of providing goods or services to other departments or funds within the government, and they are therefore considered business-type activities. Since these funds can acquire and use capital assets, they must record depreciation expense over the useful life of those assets. Special revenue funds may also acquire capital assets, but their purpose is to account for specific revenue sources that are restricted or committed to a particular program or use, and they typically do not have significant fixed assets. Permanent funds are used to account for endowments or other resources that are legally restricted to the principal or certain income, and they are not used for operating purposes, so there are no depreciation expenses. Custodial funds are used to account for assets held by the government in a trustee or agency capacity, and their financial statements typically report only the assets, liabilities, and equity of the fund, rather than revenues, expenses, and changes in net position.

Which of the Following Funds Would Record Depreciation of Capital