We would be negligent if we did not discuss the matching principle of accounting as it relates to the annual operation of the local government. An easy way to describe this principle is the philosophy that an asset should be paid for during the time the asset is
We would be negligent if we did not discuss the matching principle of accounting as it relates to the annual operation of the local government. An easy way to describe this principle is the philosophy that an asset should be paid for during the time the asset is in use. This principle has some weakness, but a straight forward example of this matching is as follows: A government purchases land and constructs a library building at the cost of $1 million. The land has an infinite life expectancy, but the building, properly maintained, may be used for 30 years. Should the taxpayers who have access to the use of the building 30 years from today pay a portion of the cost? If you answer yes, then this is a belief in the matching principle. In the new approach to making government accounting look more like commercial accounting, we now use depreciation to reflect this cost. However, depreciation is not a cash accounting entry; but if debt is issued, the payment of prin