Some companies use dozens of these subdividing accounts, while others are content with very little detail.

If special account is to be kept of the cost of a certain piece of track, line or other work, it may be given a distinguishing number. If, for illustration, the number 300 were given to the account charged with the construction of a loop at Summer Park, the line work on that particular job would be abbreviated as E-300, and if it were desired to know the cost of the insulating material used on the loop, the labor and material used in the insulation would be charged to an account abbreviated E-200-6, or what is positively a better arrangement, 300-E 6.

No matter how much or in what form the accounts are subdivided, a harmonious plan of grouping is to be kept in mind. Although the segregation is carried so far that some of the accounts seem to be a very small part of the construction cost, they merge uniformly into the general accounts. It will be necessary to make statements that show in graphic form, the aggregated costs of construction, and the accounts should be arranged so that they serve a double purpose. Controlling accounts which contain the totals of a few broad classes. of construction, will be referred to in the preparation of condensed statements; the detail contained in the numerous subsidiary accounts will be made the basis of separate reports for the officials most interested in the construction of the property.

When the plan of accounting is agreed upon, the auditor issues instructions to the head of each department that is using labor or material in construction work. These instructions should be clear and concise, describing the classification of accounts that is used, and outlining the system to be followed in the approval of bills.

No bill is passed by the auditor for payment unless it is approved by the constructing engineer or other officials delegated with this authority. If it is not considered advisable to have construction officials indicate the particular account to be charged with the expenditure, an explanation sufficient to enable the auditor's staff to make distribution to the proper accounts, should accompany or be noted upon the invoice. Pay-roll forms are printed so that the distribution of the employees' time may be entered upon the side or back of each sheet, unless shown on a separate form attached to the rolls.

Men busy "getting things done" out on the line do not always appreciate the importance of these things, but they willingly coöperate with the accountant when attention is directed to the necessity of following some definite plan.

Construction forces are frequently working a considerable. distance from the general offices, and the engineer in charge may find it advantageous to carry a force of clerks with him and advance his office headquarters as the work progresses.

In order that his operations shall not be hindered by petty delays, he is furnished a sum of money with which to make small purchases in emergencies. A round sum is usually advanced by the treasurer, and charged against the engineer as a fund held in trust. At periodic intervals the engineer makes up a list of the expenditures he has made, showing vouchers or receipts for each item, and is reimbursed the total amount expended. This keeps the fund at its original figure, and the entire amount is returned by the engineer when no longer needed.

The large purchases of construction material are made at the general offices by one of the officers whose duties and authority are clearly defined. In order to secure the lower prices obtainable by purchasing supplies in large quantities, and to take advantage of rising markets, material is frequently bought some time in advance of requirements, and stored in buildings and yards at convenient locations, to be checked out as needed. Storing protects the material from theft and the weather, and also prevents waste to a certain extent. A report of material taken out of each yard or store-room is furnished the auditor at the end of the month or at shorter intervals. The amount used in construction is then transferred from the suspense (stores) account where it has rested, to the construction accounts in detail.

Whenever material is purchased in an emergency, outside of the usual routine, the employe incurring the indebtedness for the company, should be required to report it to the general offices on a special blank used for the purpose. These blanks may be bound, in pocket size for convenience, and consecutively numbered so that all must be accounted for as used or spoiled. They are printed in triplicate, two being perforated for detaching, and one to remain permanently bound in the book.

One of the copies of this "purchase order" is given to the person who sold and delivered the material. This is the seller's receipt and is to be attached to the bill when rendered. The other detached copy is sent to the auditor or purchasing agent as may be decided upon. The form should show the names of employe purchasing, and the seller, date, job for which used, the emergency requiring the purchase, and other details required by local conditions. A modification of this form may be used as an acknowledgment of the delivery of construction material regularly purchased, so that the officials authorized to approve invoices may have on record the signatures of the employes who actually received the material.

In designing blanks to be printed for various purposes, the auditor will find it advisable to adhere to a few standard shapes and sizes that may be economically cut from full sheets. For the sake of uniformity, the type used in printing should be confined to one or two fonts of pleasing appearance, but clearcut and distinct. It will be found an advantage, in printing forms to be used only in inter-departmental accounting, to have the title of the form appear prominently, while the name of the railway may be quite inconspicuous.

The auditor's work will be simplified if the railway does not build the line with its own force, but lets contracts for all or part of the work. If the company utilizes a financial plan embracing the services of a construction company which accepts pay for its services in bonds and stock, the auditor may not be required to install a complete system of blanks and forms during the construction period. His work will consist of opening the general books and transcribing the entries thereon as reports are received from the construction company. His efforts should be directed towards securing the proper amount of detail, in order that future directors and stockholders may be provided with a complete history of the railway from its inception.

CHAPTER III.

LEDGERS, POSTING MEDIUMS AND THE BALANCE SHEET.

The accountant who is connected with the property in its early life has considerable influence in determining the kind of books that shall thereafter be kept. Changes of existing methods frequently cause friction and for that reason, established systems are not disturbed if found fairly well adapted to the requirements of the period.

The general (sometimes called the "private") ledger is indispensable. It is the key to the volume of fiscal transactions engaged in by railways; upon its pages are marshalled the regiments of figures that tell the company's history.

Formerly the transactions of almost every nature were transcribed in the book called the journal, and from thence laboriously and carefully posted to the ledger. The modern tendency to shorten work as much as possible without the sacrifice of clarity or accuracy, has resulted in the journal being used only for the entry of transactions outside of the usual routine or of a class not numerically prominent. Sometimes the journal book is dispensed with altogether, postings being made directly to the ledger from the posting slips called journal vouchers.

Journal vouchers are used for a double purpose. The approval of one or more officers is secured for the entry by the use of a voucher, and the memoranda or papers descriptive of the transaction thereby recorded, are attached to it for future reference. The vouchers are filed in suitable cases and as they are given numbers which are used in posting to ledgers, the process of posting and future investigation are both facilitated. The voucher itself need be but a simple form, provided with ample space for writing the names of the accounts debited and credited, description of or reason for the entry, and space for signatures of the officials approving.

The cash-book and journal are sometimes combined in a single book called the cash-journal, but if journal vouchers and a cash-book only are used, the work is lessened somewhat.

The cash-book, as its name indicates, is used for recording the transactions in cash. It may, for convenience, be ruled on the debit side with as many columns as there are classes of receipts, such as Passengers, Baggage, Mail, Accounts Receivable, etc., and one or more additional columns for sundry unattached items. The credit side may likewise be arranged in columnar fashion, with provision for vouchers, pay-rolls and other grouped payments. When vouchers are disbursed through several channels, a voucher cash column may be set aside for each bank through which payments are made.

It is quite desirable that the general ledger accounts be confined to the relatively important ones which are contained in the balance sheet; a statement of the debit and credit balances of the controlling accounts may then be taken at any time without having to look through the mass of detail of which they are composed.

Particular care is given to the arrangement of the accounts in the general ledger, in order that a balance sheet and statement of the income account may be prepared with little labor.

After a trial balance-which is merely a statement of the debit or credit balances as they appear in the ledger accounts at a given date-is taken, a balance sheet must be made up in order that the financial condition and result of operation may be clearly presented.

The general balance sheet is a statement of the balances in the open ledger accounts, grouped to show their relative value The balances in accounts representing assets are shown first, on the debit side of the sheet, followed by the credit balances representing liabilities. This practice is generally followed in America and Continental Europe, but the English accountant reverses this order, placing liabilities first or on the left side.

A large number of American electric railways use the following general plan of grouping the accounts in the balance sheet:

Assets:

Road and equipment.

Investments.

Current assets.

Sinking funds.

Deficit.