234 VALUATION, DEPRECIATION AND THE RATE-BASE 
which is a new suggestion and which is not contemplated in the 
foregoing instructions, but which is the one that should find 
preference for all complex public utility properties made up of a 
large number of individual items, there will be no depreciation 
to write off. It will be unnecessary to estimate accrued depre- 
ciation except when the transfer of the property is involved or a 
valuation is to be applied to individual articles. The current 
replacement requirement, however, will have to be estimated; 
but the estimate need be only approximate. The replacement 
fund will not be available for the retirement of capital. Neither 
will it be available for betterments or additions to the property. 
If it grows too rapidly, if the accumulation in it becomes un- 
necessarily large, the current replacement requirement may have 
been over-estimated; if it is depleted there may have been 
an underestimate of the replacement requirement. Excessive 
accumulation in the replacement fund should be checked by 
reducing the amount annually set apart for the fund. In the 
accounting system, the cost of cach article as it goes out of use 
is written off the books and each article which replaces a 
discarded article is entered as a renewal and is treated practi- 
cally as though it were new construction. Its cost is offset by 
the amount written off for the discarded article and the replace- 
ment fund is depleted by this cost. The capital investment 
account remains unaffected unless the cost of the new article is 
greater or less than that of the discarded article. The excess 
cost, if any, should not come out of the replacement fund but 
from new capital. The deficiency, if any, represents a reduc- 
tion of the invested capital. 
The accounting system under the Unlimited Life Method of 
procedure, as will be seen from the above statements, is much 
simpler than that for procedures which take cognizance of the 
accrued depreciation and of the constantly changing present 
value of the physical elements. 
The replacement account, if the Unlimited Life Method be 
adopted, will be credited with all expenditures that are made 
for the renewal of items which can be conveniently individualized