Internal service funds should not account for depreciation of capital assets used in their operations, since this would, in effect, charge the government twice for the same assets.

Question

Quizplus · Accepted Answer

Internal service funds should account for depreciation of capital assets because they operate in a manner similar to private businesses, and accounting for depreciation helps in accurately reflecting the cost of services provided, ensuring that the full cost of operations, including the use of capital assets, is recovered through charges to other departments or agencies.

Internal Service Funds Should Not Account for Depreciation of Capital