Sec. 4] INCOME ACCOUNTS 127

§ 4

Such irregularity of income may be avoided, not only
by a depreciation fund, but by other devices, for instance,
by paying for the house in installments, by borrowing
money to defray cost and mortgaging the house, or by selling
 other property. Another method of steadying income
and one which ought to set at rest any remaining qualms
which the reader may feel at the procedure, which has been
adopted, of entering cost of new construction under “outgo”
— applies when the same owner possesses so many of the
articles in question that the reconstruction of one or another
of them must occur at short intervals. Consider, for instance,
 the case of a building and loan association which
has fifty houses, each built in a different year and each of
which lasts fifty years, so that the houses have to be
rebuilt at the rate of one every year. In the accounts of
such an association the expense side should include the
cost of new construction as a regular annual item, thus: —

 

BuiLpinG AND LOAN ASSOCIATION

Fifty houses (with land) 1900

Income Outgo
Rents of 49 houses at Construction of one new
$1000 a year . . . $49,000 house: '.: .-. ni. 810.000
Rent of one house for Repairs on 49 houses . 4,900
part of the year in Taxes vil drs wil 5,000
which it is constructed 500
$49,500 $19,900
Netincome . . . . $29,600

We have here a net annual income of $29,600, which continues
 year after year without interruption. The irregularity
 of income which we found in the case of a single house
ceases when the larger number is taken. But if it is proper
to regard the cost of reconstructing the houses as outgo
in the case of a large number of houses, it must be equally