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 enterprises
 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 operating
 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 properties
 but also any amount paid for franchises or for waterrights
 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 service
 or to supply the commodity including taxes, insurance,
rents and the like. The net balance of the operating and income
 accounts is profit or loss.
Construction Account, Interstate Commerce Commission. —
In the general instructions of the Interstate Commerce Commission
 relating to the accounting system of railroads, construction
220