[FONT="Comic Sans MS"]
Quote:
Originally Posted by Insider
It's funny they say it didn't cost them any money because it was seized from a drug dealer. But it did cost them money, because they could have sold it and used the money for other things. Typical liberals.
|
Well, I would guess their entry to record the assumption of ownership of the siezed vehicle was something like:
Dr. Long Term Asset Group: Automobile Assets $(value of the car)
Cr. Siezed Property $0
Cr. Fund Balance$(value of the car)To record the transfer of siezed property into the force's vehicle inventory
Doing it your way, the entry would be:
Dr. Cash $(value of the car)
Cr. Siezed Proprety $0
Cr. Fund Balance $(value of the car)To record the sale of siezed property
Inasmuch as there is no difference in the value that accrues to the police department of which we write, it makes no difference (accounting-wize) whether they sold it or kept it. What they have is an asset, be it a short term, highly liquid one or an illiquid, long term one, that they acquired without having to give up another asset in exchange (i.e., buying an asset with the asset called "cash").
How they chose to use the asset is open to debate. That it cost them nothing (not including the cost to sieze it in the first place) to acquire it is a fact. Sure, they could have elected to convert their long term asset into cash (i.e., sell it), but they chose instead to keep it and use it to aid in the apprehension of presumed law breakers. Seeing as catching law breakers is one of the purposes of a police department, their choice seems reasonable, regardless of one's politics.
What the poster I quoted is referencing is called "opportunity cost." Opportunity cost is not an accountable cost; however, it is an economic concept that deals with the idea that money has various uses and to use a sum for one purpose necessarily, becasue nobody has infinite resources, means that that money resource cannot be used for another purpose. And while it is possible, after the passage of time, to compare what one may have had as a result of a different use of a resource with what one does have given the elected use of that resource, that difference is not accountable in any way.
For example, let's say the cops instead sold the car for $70K and bought an interest in a mutual fund that after one year produced a 20% increase in value, whereupon the cops sold their interest in the fund. They would account for that sequence of transactions and reflect a gain on their books. Similarly, were the value of the car they hypothetically sold "last year" to have (miraculously) escalated by 30%, they would not record a loss of 10% on their books. However, the 10% excess of the car's increase in value over the value of their chosen action (buying into the mutual fund) can be shown to be the opportunity cost of their decision.