THE ACCOUNTING SYSTEM 235
and which serve or are expected to serve for a number of years,
and it will be charged with the amount annually set apart out
of earnings for replacements. This account should be kept
separate from repair accounts although there is no fundamental
difference between the replacement of a broken spoke in a wheel
and the replacement of a discarded generator. It is funda-
mentally immaterial whether the replacement relates to single
lengths of pipe, to broken window panes and the like or whether
they are large as in the case of the dismantled steamboat. The
only difference lies in the classification of the accounts. In
either event funds for the replacement must be made available
at the proper time. It is in the making of suitable provision
for the replacement of the individualized items that expert
advice should be sought in order that a proper distinction may
be made between the apparent and the real profits of the busi-
ness. Without a proper analysis, an apparent profit has, too
frequently, been found to be in fact a loss.
Application of Accounting Principles to Other Methods. —
Under any method of procedure, other than the Unlimited Life
Method, the difficulty is presented of dealing with articles
which do not serve throughout their full probable life terms
and with articles which remain in service beyond these terms.
In the one case the cost of an article may have to be carried
for complete amortization long after the article has gone out
of use. In the other case an article with many more years of
usefulness should be rated as of no value. Accountants have
found methods to overcome these difficulties but the book-
keeping which is involved becomes complicated.
When a public utility is established and its existence is justi-
fied by all attendant circumstances, the owner has reason to
assume that the prospective business will prove profitable.
There will usually, however, be a certain time during which his
operating expenditures will exceed the revenue produced by
the property. This time may extend over a period of years.
Due consideration must be given to such facts as this as well as
to the estimates of the prospective business when the cost of a
