The Accounting Historians Journal Vol. 9, No. 1 Spring 1982
James H. Potts EAST TENNESSEE STATE UNIVERSITY
A BRIEF HISTORY OF PROPERTY AND DEPRECIATION ACCOUNTING IN MUNICIPAL ACCOUNTING
Abstract: Generally accepted accounting principles require the exclusion of perma-nent property and the non-recognition of depreciation in most governmental funds. Although this issue was settled in the early 1930s fervent debate continued as to the merits of this practice from 1895 to around 1925. Several prominent ac-countants argued for the inclusion of permanent property and the recognition of depreciation in governmental funds during this earlier period.
As might be expected, municipal accounting in the United States reflected developments in England in many ways up to about 1900. Indeed, local government in the United States was initially modeled after its English counterparts. The English Municipal Corporations Acts of 1835 and 1882 and the Local Government Act of 1888 explicitly enumerated the principal income and expenditure classifications for all English towns or boroughs. Since these Acts did not directly address the question of accounting for capital ex-penditures, English borough accountants actively debated this issue during the latter part of the nineteenth century.
By 1900, accountants and others in the United States concerned with the development of accounting systems for local government joined the debate. From 1900 to 1935 opinion on the issue of the proper accounting treatment of capital expenditures and deprecia-tion was sharply divided. However, the issue was resolved with the issuance of the statement of Municipal Accounting principles by the National Committee on Municipal Accounting in 1935.
Positions taken by English Municipal Accountants
In the latter part of the nineteenth century, considerable differ-ence of opinion about the preferred method of presenting capital expenditures on the balance sheet existed. One school of account-