CHAPTER XII 
THE ACCOUNTING SYSTEM 
Purpose of the Accounts. — It is not proposed to take up the 
matter of accounting in connection with public utility enter- 
prises any further than to indicate its purpose and to refer 
briefly to certain instructions in relation thereto which have 
been issued by public service commissions. 
The accounts should show clearly and in sufficient detail the 
facts relating to the investment, to operating expenses and to 
income. The natural division is therefore into two groups, the 
one relating to the investment, the other to income and operat- 
ing expenses. 
The accounts relating to investment are designed to show the 
investment in the property which is devoted to public use. 
These accounts should be kept in such form that the additions 
and betterments from year to year will be clearly apparent. 
They will include not alone the actual cost of all physical prop- 
erties but also any amount paid for franchises or for water- 
rights and rights of way. 
The income accounts are those which are designed to show, 
for each year, the amount of money earned for services rendered 
or for commodity delivered and the cost of rendering the service 
or furnishing the commodity. They will include the returns 
from outside investments and other sources on the one hand 
and on the other every expenditure necessary to render the ser- 
vice or to supply the commodity including taxes, insurance, 
rents and the like. The net balance of the operating and in- 
come accounts is profit or loss. 
Construction Account, Interstate Commerce Commission. — 
In the general instructions of the Interstate Commerce Commis- 
sion relating to the accounting system of railroads, construction 
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