Electric Railway Auditing and Accounting

CHAPTER I.

INTRODUCTORY.

In the early days of street railroading the bookkeeping was quite simple in character, and frequently not of sufficient importance to require the services of a trained accountant. As time went on, consolidations of existing lines were effected, and the motive power changed to electricity. The change in speed resulting from the substitution of electrical power, enabled the railway to draw its patronage from wider territory, and the opening years of the twentieth century find the electric railway entering a vast field of usefulness.

The lines in cities have been greatly improved, and with the construction of subway and elevated roads, express trains of high speed whirl the suburban resident to his city office in a very few minutes. This has encouraged the development of suburban tracts for home purposes, and as the possibilities became evident, the next steps undertaken were the construction of cross-country trolleys traversing the highways, and then the long-distance, high-speed interurbans operating upon private right-of-way.

Interurban lines have adopted many of the operating features of the steam railway, chief of which may be mentioned the sale of tickets, the establishment of stations and the handling of freight, express and baggage. Some lines have progressed further in the procurement of business, selling through tickets to passengers traveling long distances over connecting lines, and accepting freight for transportation in like manner.

This development has brought many problems to the accountants, and in the following chapters the writer has outlined the manner in which some of these problems have been met by the

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accounting officers of American railways. It has been necessary, in order to make a connected narrative, to indulge in occasional repetition and to describe at length some features quite familiar to experienced accountants.

At first a large part of the records, pay-rolls and statistics were made up in the operating departments of the railways. There was little uniformity in the methods used, and the statistical results secured were sometimes almost valueless. The development of large railway systems showed the value of skilled accountants to direct the work of preparing accurate and uniform records, and accounts. Now every road of any size has its accounting officer, who may be designated as Comptroller, General Auditor, Auditor, or by some other title. The title Auditor is used more frequently than any other, and for that reason it is the one mentioned in the succeeding chapters.

In closing this brief introductory, the writer wishes to express his appreciation of the assistance rendered by the accounting officers of several electric railways, who very kindly furnished some of the descriptions of accounting methods and samples of forms that appear in this volume.

CHAPTER II.

CONSTRUCTION ACCOUNTS.

The auditor's services in connection with the construction and operation of an electric railway may begin very early in the infancy of the project-in fact, the earlier the better.

If preliminary surveying has been completed and the route decided upon, which is frequently the case when the auditor is called upon to take charge, he should be furnished with a detailed statement of the amount already expended for organization, engineering and other purposes.

With this as a basis, it will be his duty to inaugurate a system of accounts and vouchers that will enable him to keep an accurate check upon expenditures. In addition thereto, the system should be so planned that the auditor may furnish his board of directors, from time to time, with a concise summary of the construction work completed and in process of completion.

In order to secure the best results, and avoid misdirected effort, the auditor should obtain a general outline of the information that will be expected, before planning his system. of accounts. It is possible that his directors may wish to know the cost of certain bridges, sidings or buildings. It is much more satisfactory to provide special accounts for these jobs in advance than to try to explain, after the work is completed, why the information cannot be furnished. If the various units of cost required are set beforehand, the auditor may direct his forces accordingly.

Labor and material will be purchased in large quantities and used in a great variety of construction work. If all trackmen's wages are charged to a blanket account called Track and Roadway Construction, and all building material to Buildings account, without being separated into job costs, it will be utterly impossible to furnish the management with accurate costs in detail.

In planning any classification of accounts the auditor will

necessarily be guided by the restrictions that may have been placed by legislative act upon the manner of accounting.

The Street Railway Accountants' Association of America prepared a system of classifying construction and equipment expenditures which has since been used by a large number of electric railways. The titles of the accounts used in this classification follow:

A. Organization.

B. Engineering and Superintendence.

C. Right of Way.

D. Track and Roadway Construction.

F.

Electric Line Construction.

Real Estate Used in Operation of Road.

G. Buildings and Fixtures used in Operation of Road.

It will be noted that, in a measure, the arrangement of accounts is an index to the manner in which the construction work progresses, the first step being the organization of the company and its consequent expenditures for incorporation fees, etc.

Local conditions require that different subdivisions of the accounts included in this classification shall be used. It is generally found advisable to keep separate accounts for such large items as wire, poles, insulating material, etc., under the heading Electric Line Construction, and to subdivide most of the general accounts in this manner. These sub-accounts are usually designated by number suffixes in addition to the letter, in order that the full titles of the accounts may be abbreviated.

For example, the account including the cost of poles for electric line construction may be known as account E-5, while insulating material and wire are designated respectively, as, E-6 and E-7.