5^6 15 \^ CORNELL UNIVERSITY LIBRARY ' BUSINESS STATE OF NEW JERSEY Cornell University Library HF5686.W3N51913 Uniform system of accounts for water uti BOARD Oi 3 1924 018 781 793 PUBLIC UTILITY COMMISSIONERS UNIFORM SYSTEM OF ACCOUNTS FOR Water Utilities '%^; FIRST ISSUE Effective January 1, 1913 TRENTO 1912. "''nhat,, 269. It The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924018781793 STATE OF NEW JERSEY BOARD OF PUBLIC UTILITY COMMISSIONERS UNIFORM SYSTEM OF ACCOUNTS FOR Water Utilities FIRST ISSUE Effective January 1, 1913 TRENTON 1912, 170 UNIFORM SYSTEM OF ACCOUNTS for WATER UTILITIES. The uniform system of-accounts contained in this cir- cular is established and issued by the Board of Public Util- ity Commissioners, State of New Jersey, under the follow- ing provision of Chapter 195, Laws of 1911: Section II, Paragraph 17: The board shall have power, after hearing, upon notice, by order in writing, to require every public utility as herein defined : (d) To keep its books, records and accoimts so as to afford an intelligent understanding of its business and to that end to require every such public utility of the same class to adopt a uniform system of accounting. On and after January 1, 1913, every water utility, as defined in Section I, Paragraph 15 of the above mentioned statute, will be required to carry on its books the accounts herein prescribed or defined, in so far as the same are per- tinent to the facts and circumstances of said utility, and to keep such accounts in conformity with the definitions and instructions contained herein. During the year beginning January 1, 1913, any water utility may, for purposes of comparison, keep on its books, in addition to the accounts herein prescribed, such portion or portions of its present accounts as may be deemed desir- able by any such utility. For purposes of efficiency of administration and opera- tion, any utility may, unless or until otherwise ordered, keep upon its books any temporary or experimental ac- counts, and any accounts covering particular divisions of its operations, provided that such temporary, experimental, or divisional account shall not impair the integrity of any account herein prescribed. LIST OF ACCOUNTS. SCHEDULE A: BALANCE SHEET OR INDICANT ACCOUNTS. ASSET ^ACCOUNTS. FADE. 100. FIXED CAPITAL INSTALLED PRIOR TO JANUARY 1, 1913 10 101-42. FIXED CAPITAL INSTALLED SINCE DE- CEMBER 31, 1912 11 150. FIXED CAPITAL IN OTHER DEPARTMENTS 11 151. OONiSTEUCTlON WORK IN PROGRESS 11 152. MATERIALS AND SUPPLIES 11 153. CASH 12 164. BILLS RECEIVABLE 13 155. ACCOUNTS RECEIVABLE 13 156. INTEREST AND DIVIDENDS RECEIVABLE 13 157. OTHER CURRENT ASSETS 13 158. COUPOiN SPECIAL DEPOSITS 14 159. OTHER SPECIAL DEPOSITS 14 160. INVESTMENTS 14 161. RE-ACQUIRED SECURITIES 15 162. SINKING FUNDS 15 163. OTHER SPECIAL FUNDS 15 164. PREPAYMENTS 15 165. UNAMORTIZED DEBT DISCOUNT AND EXPENSE. . . . 16 PENSE 16 166. PROPERTY ABANDONED 16 167. OTHER SUSPENSE 17 168. CORPORATE DEFICIT 17 LIABILITY ACCODNTS. 200. FUNDED DEBT 18 201. TAXES ACCRUED 19 202. RECEIVER'S CERTIFICATES 19 203. JUDGMENTS UNPAID 19 204. INTEREST AOORUED 19 205. OTHER ACCRUED LIABILITIES 20 206. DIVIDENDS DECLARED 20 207. BILLS PAYABLE 20 208. ADVANCES FROM OTHER CORPORATIONS 20 209. CONSUMERS' DEPOSITS 21 210. OTHER ACCOUNTS PAYABLE 21 211. UNEARNED REVENUE 21 212. OTHER UNFUNDED DEBT 21 213. PREMIUMS ON STOCKS 21 214. OTHER PERMANENT RESERVES 22 215. SINKING FUND AND OTHER CONTRACTUAL RESERVES 22 216. ACCRUED AMORTIZATION OF CAPITAL 23 217. UNAMORTIZED PREMIUM ON DEBT 23 218. OTHER REQUIRED RESERVES 23 3 FADE. 219. CASUALTY AND INSURANCE RESERVE 24 220. OTHER OPTIONAL RESERVES 24 221. CAPITAL STOCK 2J 222. CORPORATE SURPLUS 25 FIXED CAPITAL ACCOUNTS. /. INTANGIBLE FIXED CAPITAL. 101. ORGANIZATION 27 102. FRANCHISES 27 103. PATENT RIGHTS 23 104. OTHER INTANGIBLE WATER CAPITAL 28 //. WATER COLLECTINO SYSTEM. 105. WATER DIVERSION RIGHTS 23 100. RESERVATIONS 29 107. IMPOUNDING DAMS AND RESERVOIRS 29 108. LAKE AND RIVER CRIBS 20 109. SPRINGS AND WELLS 29 110. INFILTRATION GALLERIES AND TUNNELS 29 111. COLLECTING CONDUITS AND RESERVOFES 29 112. GRAVITY INTAKES AND SUCTION MAINS 30 113. AQUEDUCTS AND SUPPLY MAINS 30 III. PURIFICATION SYSTEM. 114. SETTLING BASINS 30 115. COAGULATING BASINS 31 IIG. SOFTENING AND IRON REMOVAL PLANT 31 117. FILTERS 31 118. OZONE STERILIZING AND AERATION PLANT 31 119. CHEMICAL TREATMENT PLANT 32 120. CLEAR WATER BASINS 32 IV. PUMPING SYSTEM. 121. PUMPING STATIONS 33 122. STEAM POWER PU.MPING EQUIPMENT 33 123. HYDRAULIC POWER PUMPING EQUIP- MENT 33 124. ELECTRIC POWER PUMPING EQUIPMENT 33 125. GAS POWER PUMPING EQUIPMENT 33 126. MISCELLANEOUS PUMPING EQUIPMENT 31 V. DISTRIBUTION SYSTEM. 127. TRANSMISSION MAINS AND ACCESSORIES 34 128. STORAGE RESERVOIRS, TANKS AND STAND- PIPES 34 129. DISXRIBUTIOX MAINS AND ACCESSORIES 34 130. SERVICE PIPES AND STOPS 35 131. METERS, METER BOXES AND VAULTS 35 132. FIRE HYDRANTS AND FIRE CISTERNS 35 133. FOUNTAINS, TROUGHS AND OTHER EQUIP- MENT 35 4 FAQX. VI. MISCELLANEOUS PROPERTIES. 134. GENERAL iSTEUCTURES 35 135. GENERAL EQUIPMENT 36 136. OTHER TANGIBLE WATER CAPITAL 37 VII. MISCELLANEOUS CONSTRUCTION EXPENDITURES. 137. ENGINEERING AND SUPERINTENDENCE 37 138. LAW EXPENDITURES DURING CONSTRUCTION .... 38 139. INJURIES DURING CONSTRUCTION 38 140. TAXES DURING CONSTRUCTION 38 141. MISCELLANEOUS CONSTRUCTION EXPENDI- TURES 38 142. INTEREST DURING CONSTRUCTION 39 SCEEDULE B: INCOME ACCOUNT. 300. OPERATING REVENUES 40 400. OPERATING REVENUE DEDUCTIONS 40 NON-OPEBATINQ REVENUES AND DEDUCTIONS. 501. RENTS ACCRUED FROM LEASE OF WATER PLANT 41 502. MISCELLANEOUS RENT REVENUES 41 503. INTEREST REVENUES 42 504. DIVIDEND REVENUES 42 505. MISCELLANEOUS NON-OPERATING REVENUES 42 506. NON-OPERATING REVENUE DEDUCTIONS 42 Income DEnucnoNS. 511. INTEREST ACCRUED ON FUNDED DEBT 44 512. OTHER INTEREST DEDUCTIONS 44 513. RENT FOR LEASE OF OTHER WATER PLANT AND EQUIPMENT 44 514. MISCELLANEOUS RENT DEDUCTIONS 45 515. MISCELLANEOUS DEDUCTIONS FROM INCOME 45 516. AMORTIZATION DEDUCTIONS 46 AprBOPBiATiON Accounts. 521. BAD DEBTS COLLECTED 47 522. OTHER ADDITIONS TO SURPLUS 48 523. EXPENSES ELSEWHERE UNPROVIDED FOR 48 524. DIVIDENDS ON OUTSTANDING STOCKS 48 525. MISCELLANEOUS APPROPRIATIONS 48 526. BAD DEBTS WRITTEN OFF 49 527. OTHER DEDUCTIONS FROM SURPLUS 49 OPERATING REVENUE ACCOUNTS. 301. METERED PRIVATE SERVICE 50 302. UNMETERED PRIVATE SERVICE 50 303. SERVICE TO OTHER WATER SUPPLY SYSTEMS 50 •5 304. MUNICIPAL WATER SEEVIGE 50 305. MISCELLANEOUS WATER SERVICE 51 306. MISCELLANEOUS OPERATING REVENUES 51 OPERATING EXPENSE ACCOUNTS. I. WATfiR SUPPLY EXPENSES. 401. COLLECTING SYSTEM EXPENSES 53 402. PURIFICATION SYSTEM EXPENSES 64 403. PUMPING SYSTEM EXPENSES 64 404. DISTRIBUTION EXPENSES 55 II. MAINTENANCE EXPENSES. 405. REPAIRS OF WATER COLLECTING SYSTEM 56 406. REPAIRS OF PURIFICATION SYSTEM 56 407. REPAIRS OF PUMPING SYSTEM 56 408. REPAIRS OF DISTRIBUTION SYSTEM 57 409. GENERAL REPAIRS 69 410. GENERAL AMORTIZATION 59 III. GENERAL AND MISCELLANEOUS EXPENSES. 411. ADMINISTRATION EXPENSES 59 412. ACCOUNTING AND COMMERCIAL EXPENSES 60 413. BUSINESS PROMOTION EXPENSES 61 414. LEGAL EXPENSES 61 415. INJURIES AND DAMAGES 61 416. INSURANCE 62 417. RELIEF DEPARTMENT AND PENSIONS 62 418. WATER FRANCHISE REQUIREMENTS 62 419. STORE AND STABLE EXPENSES 62 420. MISCELLANEOUS ADJUSTMENTS— BALANCE 63 421. MISCELLANEOUS GENERAL EXPENSES 64 422. TAXES 64 423. UNCOLLECTIBLE WATER BILLS 05 SCHEDULE A. BALANCE SHEET OR INDICANT ACCOUNTS. DEFINITIONS AND INSTRUCTIONS. 1. Public Utility and Water Operations Defined. — Section I, Paragraph 15, Chapter 195, Laws of 1911, defines "'public utility" as follows : "The term 'public util- ity' is hereby defined to include every individual, co-part- nership, association, corporation, or joint stock company, their lessees, trustees or receivers appointed by any court whatsoever, that now or hereafter may own, operate, man- age or control within the State of New Jersey any steam railroad, street railway, traction railway, canal, express, subway, pipe line, gas, electric light, heat, power, water, oil, sewer, telephone, telegraph system, plant or equipment for public use, under privileges granted or hereafter to be granted by the State of New Jersey or by any political subdivision thereof." Water operations, as the term is hereinafter used, in- clude all acts and transactions directly connected with the operation of a plant for the collection, purification and pumping of water to be distributed or sold for dis- tribution to consumers thereof, and all operations incident thereto, including the collection of revenues therefor and the disposition of any by-product produced in connection therewith. 2. Accounts to be kept by double-entry method. — All accounts kept by any corporation or person within the scope of the present order shall on and after January 1, 1913, be kept by the double-entry method. Note. — This requirement is not intended to apply to purely sta- tistical accounts. 3. Capital Defined. — As the term is used herein, by capital of a corporation is meant all property devoted to the rendering of the services or the production of the commodities which are within the purposes of the corpora- tion. 4. Fixed Capital Defined. — Capital which has an ex- pectation of life in service of more than one year (ex- ception being made of hand and other small portable tools liable to be lost or stolen) is called fixed capital. Note. — Hand and other small portable tools liable to be lost or stolen shall, when first acquired and before issued for use, be car- ried in a suitable Materials and Supplies account; when issued they shall be charged to the appropriate expense account. Portable tools and apparatus of special value may, however, be charged to the ap- propriate tangible capital account and remain therein so long as record is kept of the persons to whom such tools and apparatus are issued and such persons are made responsible therefor. 8 5. Floating Capital Defined.— Capital other than fixed capital is called Floating Capital. 6. General Capital and Departmental Capital Defined. — Fixed capital is divisible into general capital and de- partmental capital, general capital being that which is in- discriminately available for the uses of two or more classes of operations, while departmental capital is that assigned solely or principally to a single class of operations. 7. Landed Capital and Non-landed Capital Defined. — Fixed capital is also divisible into landed capital and non-landed capital. Landed capital includes all interests in land (exclusive of improvements thereon), the term of which is more than one year. All other fixed capital is herein called non-landed capital. 8. Intangible and Tangible Capital Distinguished. — Non-landed capital is divisible into intangible and tan- gible. Intangible capital comprises organization, fran- chises, patent-rights, and all other intangible capital within the definition of fixed non-landed capital as above stated. Tangible capital comprises structures and equip- ment having an expectation of life in service of more than one year. Because of their liability to loss or theft, hand or other small portable tools are excepted from tangible capital, and the cost of such tools when issued is required to be treated as a part of the operating ex- penses. (See note under definition No. 4.) 9. First Entries Must Enable Identification. — The first entry relating to anything for which a charge or a credit is made to any fixed capital or investment ac- count shall describe the property in respect of which the entry is made with such fullness and particularity as to enable its identification. 10. Costs to be Actual Money Costs. — All charges made to fixed capital or other property accounts with re- spect to any property acquired on or after January 1st, 1913, shall be the actual money cost of the property. When the consideration actually given for anything with respect to which a charge is made to any fixed capital or other property account is anything other than money, the actual consideration shall be described in the entry with sufficient fullness and particularity to identify it, and the amount charged shall be the actual money value of such considera- tion at the time of the transaction. 11. Discounts Upon Securities Not to be Included in Costs. — Discounts upon securities and other commer- cial paper issued are to be provided for in other accounts and must in no case be included as a part of the cost of any property acquired. 12. Costs of Labor, Materials and Supplies. — Cost of labor (employed in construction) includes not only wages, salaries and fees paid employees, but also such personal expenses of employees as are borne by the com- pany. Cost of materials and supplies consumed in con- struction is the cost at the places where they enter into con- struction, including cost of transportation and inspection when specifically assignable. If such materials and sup- plies are passed through storehouses, their cost entered in the account may include a suitable proportion of store ex- pense. The term "cost" as used herein means the actual cost in money of labor and materials used in construction, or the actual cost in money of property acquired after con- struction, or if the consideration given is other than money, the actual money value of such other consideration at the time of the purchase. 13. Withdrawals or Retirements. — When anything (not including minor parts the renewal of which is con- sidered a repair) is withdrawn or retired from service, the amount at which it stood charged shall be credited to the account in which it stood charged at the time of with- drawal, and the entry of such credit shall cite by name and page of book or other record the original entry of cost of the thing withdrawn. If there is no such original entry, that fact shall be stated in connection with the credit entry, and the actual amount originally charged shall he credited. If such amount is not known, it shall be esti- mated, the facts upon which the estimate is based and the name of the person by whom estimated shall be shown, and the amount thus estimated to be the original charge in respect of such thing withdrawn shall be credited. 14. Plant and Equipment and Other Property Pur- chased. — When any property in the form of a going or completed plant is purchased, an appraisal of the prop- erty so acquired shall be made, and the different con- stituent elements of the plant and equipment, or other property acquired shall be appraised at their structural value ; that is to say, at the estimated cost of replacement or reproduction less deterioration to the then existing con- dition through wear and tear, obsolescence and inadequacy. If the actual money value of the consideration given for the plant or other property was at the time of the acquisi- tion in excess of such appraised value, the excess shall be charged to account No. 104, "Other Intangible Water Capital," and the appraised values of the constituent ele- ments shall be charged to the appropriate fixed capital ac- 10 counts as hereinafter designated. If the actual money value of the consideration given was not in excess of such appraised value, such actual money value shall be distri- buted through the said accounts in proportion to the said appraised value of the constituent elements appropriate to the respective accounts. Full report of the contract of ac- quisition, the consideration given therefor, the determina- tion of the actual money value of such consideration, the appraisal, and the amounts charged to the respective ac- counts for each plant or other such property purchased, will be required to be filed with the Board of Public Util- ity Commissioners, and the purchaser will be required to procure in connection with the acquisition of any such plant or other fixed capital all existing records, memoran- da, and accounts in the possession or control of the grantor relating to the construction and improvement of such plant, and to preserve such records, memoranda, and accounts until authorized by law to destroy or otherwise dispose of them. ASSET ACCOUNTS. 100. FIXED CAPITAL INSTALLED PRIOR TO JANUARY 1, 1913. Charge to this account all the Fixed Capital of the accounting person or corporation devoted to water op- erations as such capital stood at the close of Decem- ber 31, 1912. Such charges should be made at the figures at which such capital was carried on the books of the said person or corporation on that date. No charges should be made to this account with respect to any property subsequently acquired, but the cost of such property should be charged to accounts Nos. 101-142, hereinafter provided. When any capital included in this account is with- drawn or retired from service, the amount at which it is charged therein (estimated, if not known) should be credited thereto, and the amount so cred- ited, less salvage, should (except as specified below under "Property Abandoned") be concurrently charged to account No. 216, "Accrued Amortization of Capital," and any debit balance in the latter ac- count closed out at the end of the fiscal year into the "Corporate Surplus or Deficit" account. Note. — Corporations will be required to carry as sub- accounts of account No. 100, the several accounts on their ■books on December 31, 1912, which are combined to make up the said account, and to furnish information concerning such sub-accounts in their annual reports. 11 101-142. FIXED CAPITAL INSTALLED SINCE DE- CEMBER 31, 1912. Charge to the proper sub-account hereunder (see pp. 27-39) the cost of all fixed capital of the ac- counting person or corporation devoted to water op- erations, installed or acquired since December 31, 1912. 150. FIXED CAPITAL IN OTHER DEPART- MENTS. Charge to this account, or to appropriate sub-ac- counts hereunder, all fixed capital of the accounting person or corporation, both tangible and intangible, devoted to other than water operations. 151. CONSTRUCTION WORK IN PROGRESS. Charge to this account the amounts expended up- on plant and equipment in process of construction under estimate or work orders but not yet ready for service, including such proportion of plant super- vision expenses, engineering expenses, tool expenses, supply expenses, and general expenses as may be properly chargeable to the construction work included under this account. As soon as such work is com- pleted the cost of same should be credited to this account and charged to the appropriate fixed capital or other accounts. In case any expenditures are carried in this ac- count beyond the close of any fiscal year, companies will be required to furnish in their annual reports a complete analysis of this account, showing the total amount expended during the year upon each par- ticular job, the date when same was begun, the date when it is expected to be completed, and such further information as the Board may deem necessary. 15. Floating Capital Divided Into Two Groups. — Floating Capital is divided into two great groups, of which the first is herein called Materials and Supplies, and the second, Current Assets. 152. MATERIALS AND SUPPLIES. Charge to this account or appropriate sub-accounts hereunder the cost (including transportation) of all materials and supplies acquired, the salvage value of discarded equipment, and of equipment, materials and supplies returned to store, regardless of whether the same are intended to be consumed in construction or in operation, or later to be sold. Where discounts 12 recovered through prompt payment are not credited to the particular bills, the cost at which such mate- rials and supplies shall be charged shall be the in- voice cost, and any discounts recovered through prompt payment of bills for such materials and sup- plies should be credited to account No. 142, "Interest During Construction," or to account No. 420, "Mis- cellaneous Adjustments — Balance," according as such materials and supplies are intended for construction or for operation. When the use of any tangible fixed capital is dis- continued, it shall be treated as retired. The original cost of such capital should be credited to the fixed capital account in which carried, and the salvage value, if any, charged to this account or an appro- priate sub-account. If such value is not known and cannot readily be determined, it should be estimated, and errors in such estimates, when determined, ad- justed through the accounts involved. Inventories of materials and supplies should be taken at least annually, and any shortages or overages disclosed by such inventories should be credited or debited to this account, and debited or credited to the operating expense account No. 420, "Miscellaneous Adjustments — Balance," in case they cannot be as- signed to specific accounts. When such materials and supplies have been used in construction, a suit- able proportion of such shortages and overages may be debited or credited to account No. 141, "Miscel- laneous Construction Expenditures." Note. — It is not required that the transportation ele- ment of cost shall be assigned with a greater degree of accuracy than to the nearest cent per unit of material or supply. Where a single transportation item covers a mul- titude ol things, the portion of the expense not assigned to specitio things should be charged to the same account that store expenses are charged to. 153. CASH. Charge to this account all money coming into the possession of the corporation and in which the cor- poration has the beneficial interest. This includes coin of the United States, United States treasury notes, gold and silver certificates and greenbacks, and bank bills payable to bearer. Also charge to it all bank credits, checks and drafts receivable, subject to sat- isfaction or transfer upon demand (whether payable to bearer or to order). Credit this account with all cash disbursements of the corporation. 13 154. BILLS RECEIVABLE. Charge to this account the cost of all negotiable paper in the form of notes receivable or other sim- ilar evidences of money receivable on demand or within a time not exceeding one year. This includes demand notes, drafts, etc., issued by others than banks, and time notes, drafts, etc., by whomsoever issued. It does not include investments nor interest coupons. Time loans that mature more than one year after date of issue should be considered as invest- ments and should not be included in this account. 155. ACCOUNTS RECEIVABLE. Charge to this account all amounts owing to the accounting person or corporation upon accounts with solvent concerns (other than bank accounts) ; also all accounts and claims upon which responsibility is acknowledged by solvent concerns or individuals, or which are sufficiently secured to be considered good, and all judgments against solvent concerns where the judgment is not appealable or suspended through ap- peal. This account does not include negotiables. 156. INTEREST AND DIVIDENDS RECEIVABLE. To the appropriate sub-account hereunder should be charged all interest considered collectible, which has accrued but has not yet been collected, upon in- vestments, notes receivable, or other commercial pa- per, and accounts considered collectible held by or for the benefit of the company; also all dividends de- clared or guaranteed by solvent concerns but not yet collected, the right to which is in the corporation. 157. OTHER CURRENT ASSETS. Charge to this account the cost of all current assets of the corporation which are not includible under any of the last four foregoing accounts. By current as- sets are meant only those things which are readily convertible into money, and which are held with the intent of being presently converted into money and not as investments. i6. Special Deposits Defined. — By Special Deposits, as here used, are meant amounts of money and bank credits in the hands of fiscal or other agents of the corporation for the payment of coupons, dividends, or other special purposes. Credits at banks subject to check of the corporation or its agents for general pur- poses, deposits at banks, whether withdrawable at pleasure or after a specified time, amounts of money 14 in safe deposit vaults, etc., so long as they are avail- able for general purposes of the corporation, should be excluded herefrom. 158. COUPON SPECIAL DEPOSITS. Charge to this account all moneys and bank credits specially deposited in the hands of fiscal agents or other agents of the corporation for the payment of interest coupons when presented. Such coupons, when paid from such deposits, should be credited to this account and charged to the appropriate matured interest account. Payments to trustees (or other agents) of the holders of bonds or other securities of the interest accrued thereon, which operate under the terms of the securities (or of mortgages support- ing such securities) as a release of the paying cor- poration from further liability for such interest, shall not be charged to this account, but to the ap- propriate "Interest Accrued" account. 159. OTHER SPECIAL DEPOSITS. Charge to this account all moneys and bank credits deposited in the hands of fiscal agents or other agents of the corporation for other special purposes not else- where provided for. Charges to this account should specify the purpose for which the deposit is made. When such purposes are satisfied this account should be credited with the amount specially deposited to provide such satisfaction. 160. INVESTMENTS. Charge to this account or appropriate sub-accounts hereunder, the cost of all properties acquired, not for use in present operations, but as a means of obtaining or exercising control over other corporations, or for income to be derived therefrom, or for a rise in value, or for devotion to future operations at a time when it seems probable that they cannot be so advantage- ously acquired as at time of actual acquisition. In- vestments should be classified into bound and free investments. By bound investments are meant those held subject to a lien of some character; by free in- vestments are meant those held free of all liens. Note. — In the annual reports to the Board of Public Utility Commissioners, investments, whether bound or free, will be required to be classified with at least the following detail: Funded Debt of Controlling Corporations, Funded Debt of Affiliated Corporations, Funded Debt of Controlled Corporations, Stocks of Controlling Corporations, Stocks of Affiliated Corporations, Stocks of Controlled Corpora- tions, Advances to Controlling, Controlled or AfBliated 15 Corporations, Funded Debt of Other Corporations, Stocks of Other Corporations, Land, Improvements on Land, and Other Investments. From this account should he excluded all securities car- ried in Sinking or Other Special Reserve Funds, separate accounts for which are elsewhere provided. 161. RE-ACQUIRED SECURITIES. When securities, whether funded debt or stocks, have been actually issued to bona fide holders for value (or after such issue by another corporation) have been assumed by the accounting corporation, and after such issue (or assumption) have been ac- quired by the corporation under circumstances which require that they shall not be treated as paid or re- tired, they should be charged at face value to this account. 162. SINKING FUNDS. In this account should be included the amount of cash and the cost or book value of securities in the hands of trustees of sinking and other funds for the purpose of redeeming outstanding obligations. A separate sub-account should be carried for each sep- arate sinking fund. 163. OTHER SPECIAL FUNDS. In this account should be included the amount of cash and the cost or book value of securities in any special fund belonging to or held in trust by the ac- counting person or corporation for specific purposes not elsewhere provided for. A separate sub-account should be carried for each separate fund. 164. PREPAYMENTS. When payments for taxes, insurance, rents, etc., are made in advance of the period to which they per- tain, the amount of the advance payment should be charged to an appropriate sub-account hereundter. At the close of each month or quarter thereafter the amount of the advance payment applicable thereto should be credited to such account and charged to the appropriate expense or other income account. 17. Suspense. — When any expenditure is made, the appropriate disposition of which is not yet determin- able, or when any loss occurs which is to be spread over a period of time, or when any other debit is amortized through charges made to expense or other income accounts at intervals over a period of time, such expenditure, loss or other debit, should, except as 16 herein otherwise directed, be charged to the appro- priate suspense account. The word "amortization" as used herein denotes the gradual extinction of a charge or the clearing off of expiring value. It is applied to tangible or intan- gible property, wherein it is more comprehensive than "depreciation." 165. UNAMORTIZED DEBT DISCOUNT AND EX- PENSE. When funded debt securities and other evidences of indebtedness are disposed of for a consideration whose cash value is less than the sum of the par value of the securities or other evidences of indebtedness and of the interest thereon accrued at the time the transfer takes place, the excess of such sum of the par value and accrued interest over the cash value of the consideration received shall be charged to this account. To this account shall also be charged all expense connected with the issue and sale of evidences of debt, such as fees for drafting mortgages and trust deeds, fees and taxes for recording mortgages and trust deeds, cost of engraving and printing bonds, certificates of indebtedness and other commercial pa- per having a life of more than one year, fees paid trustees provided for in mortgages and trust deeds, fees and commissions paid underwriters and bro- kers for marketing such evidences of debt, and other like expense. At or before the close of each fiscal period thereafter, a proportion of such discount and expense, based upon the life of the security to ma- turity, shall be credited to this account and charged to account No. 516, "Amortization of Debt Discount and Expense." 166. PROPERTY ABANDONED. When any important piece of property, other than land, included in fixed capital accounts, is abandoned by reason of its being replaced with enlarged, im- proved, or more efficient property, the corporation may, if so authorized upon application to the Board of Public Utility Commissioners, open on its books a "Property Abandoned" account. The purpose in pro- viding this account is to enable the corporation to charge ofif during a term of years the loss on prop- erty abandoned on account of improvements or bet- terments in the interest of greater efficiency. When property is charged to this account, it should be at the original cost ( estim9,t?d, if ?iot known), less 17 salvage, and less the amount of accrued depreciation applicable thereto. The appropriate property account should be credited with the cost of the property; "Accrued Amortization of Capital" should be charged with the amount of accrued depreciation; the proper accounts should be debited with salvage; and the bal- ance should be charged to this account, to be extin- guished during a period of years by charges against income or against surplus, according as the Board, on application, decides. Note. — This account does not apply to property acquired subsequently to December 31, 1912; on sucli property the charges for depreciation in operating expenses should be sufficient to care for all wear and tear, obsolescence and inadequacy. 167. OTHER SUSPENSE. To this account should be made all debits not pro- vided for elsewhere, the proper final disposition of which is uncertain. This includes all expenses of preliminary surveys, plans, investigations, etc., made for determining the feasibility of projects under con- templation. Should any such project later be carried to completion, the amounts so expended should be credited to this account and charged to the proper fixed capital accounts; should it be abandoned, the amounts should be charged to the appropriate operat- ing expense or other income account. When the proper disposition of any matter charged to this account is determined, it should be credited to this account and charged to the appropriate ac- count or accounts. 168. CORPORATE DEFICIT. Under this head should be shown the debit balance, if any, in the "Corporate Surplus or Deficit Ac- count." LIABILITY ACCODNTS. i8. Debt Defined. — The wrord debt, as here used, covers all absolute obligations to pay money at a definite time or times, or at a time or times which are capable of being made definite by demand or other act of the creditor. It does not cover contingent obliga- tions, such as obligations to pay rent for future en- joyment of the term, liabihties of indorsers upon paper not yet defaulted, etc. Debt is divided into Funded Debt and Unfunded Debt, 18 ig. Funded Debt Defined. — Funded Debt comprises all debt which by the terms of its creation does not ma- ture until more than one year after date of creation. 20. Unfunded Debt Defined. — Unfunded Debt com- prises all debt which by the terms of its creation ma- tures one year or less after the date of creation or after demand. 200. FUNDED DEBT ACCOUNTS. Funded debt shall be divided in the accounts into classes, such classes being determined by the four characteristics: (1) mortgage or other lien or security therefor, (2) rate of interest, (3) interest dates, and (4) date of maturity. A separate sub-account shall be raised for each such class of funded debt, and no two amounts of debt not agreeing in respect of all four of the characteristics above named shall be in- cluded in the same sub-account. The title of each sub-account of funded debt shall express the four characteristics above stated; that is to say, mortgage or other lien or security, rate of interest, dates of maturity of interest and date of maturity of princi- pal, as e. g. : "First Mortgage 5 per cent. QF 10, Au- gust 10, 1928," which means funded debt secured by the company's first mortgage, bearing interest at the rate of 5 per cent, per annum, interest maturing quar- terly, on February 10th, May 10th, August 10th, and November 10th of each year, principal maturing Au- gust 10th, 1928. Where any portion of the funded debt rests only on the general credit of the corporation and is not specially secured or supported by lien of any char- acter, it shall for the purpose of these accounts be known as a "debenture." "Debentures" thus include promissory notes unsecured by mortgage or other lien ; also those securities commonly known as "plain bonds." To the appropriate sub-account in "Funded Debt" shall be credited, when issued, the par value of the amount of evidence of funded indebtedness issued. The entry shall show not only the amount issued, but the purposes for which issued, and shall make in- telligible reference to the book, page and account whereon are shown any discounts or premiums real- ized on the amount issued. If the consideration re- ceived for the issue is anything else than money, the entry shall show further the principal to whom issued, and shall describe with sufficient particularity to iden- tify it the actual consideration received for the issue. If the issue in any case is to an agent of an undis- 19 closed principal, the name and business address of such agent and the fact of his agency shall be shown in the entry. 21. Unfunded Debt Accounts. — The accounts for un- funded debt are defined as follows : 201. TAXES ACCRUED. Credit to this account at the close of each month or quarter the taxes accrued during the period, and make corresponding charges to the appropriate "Taxes" account. Charges to the account "Taxes Accrued" will necessarily be based upon estimate until the amount of tax levied for the tax period is known ; such estimates shall be based upon the best data available, and as soon as the amount of tax for the period is known the account involved shall be adjusted to conform. When any tax is paid it shall be charged to this account and credited to "Cash" or other suitable account. 202. RECEIVER'S CERTIFICATES. When any receiver, acting under the orders of a competent court, is in possession of the property of the corporation and under the orders of such court issues certificates of indebtedness chargeable upon such property, the par value of such certificates should be credited to this account. Interest accru- ing upon such certificates should also be credited to this account. 203. JUDGMENTS UNPAID. When any judgment of indebtedness is rendered by a court of competent jurisdiction against the corporation, or any fine or penalty requiring the payment of money is assessed by such a court against the corporation, and no appeal accompanied by stay of execution has been taken therefrom within the time allowed by law for such appeal, the amount of such judgment should be credited to this account, and the entry should designate the ac- tion or suit as a consequence of which such judg- ment is pronounced or such fine or penalty as- sessed. The designation of the action or suit should show the court, the term thereof, the parties and the character of the action or suit. Interest accrued upon any such judgment should also be credited to this account. 204. INTEREST ACCRUED. Credit to this account at the close of each month 20 or quarter the interest accrued during the period upon indebtedness of the corporation. When such interest is paid it shall be charged to this account and credited to "Cash" or other suitable account. The account "Interest Accrued" does not include interest on judgments, nor that upon receiver's cer- tificates. The interest accruing on any judgment against the corporation or upon any receiver's cer- tificate shall be credited to the account to which such judgment or receiver's certificate stands cred- ited. KoTE. — When coupon interest matures it should be trans- ferred from the sub-account "Unmatured Coupon Interest Accrued" to the sub-account "Coupon Interest Matured." When such interest is paid out of coupon special de- posits tile sub-account "Coupon Interest JIatured" should be cliarged and the account "Coupon Special Deposits" credited. 205. OTHER ACCRUED LIABILITIES. By accrued liabilities are meant those which accrue from day to day but do not become due until a particular date, such as interest, rent, taxes, etc. At the close of each month or quarter there should be credited to the appropriate sub-account here- under, and charged to the proper operating ex- pense, revenue or income deduction account, the amount of all such liabilities not provided for above, which has accrued during the period. When pajnnents for same are made, they should be charg- ed to the accrued liability accounts and credited to "Cash" or other suitable account. 206. DIVIDENDS DECLARED. When any dividend is declared it should be cred- ited to this account and here remain until it is paid, when it should be charged to this account and cred- ited to "Cash" or other suitable account. 207. BILLS PAYABLE. When any note, draft or other bill payable, which matures not later than one year after date of issue or of demand, is issued or a primary liability there- on assumed by the accounting person or corpora- tion, the par value tliereof should be credited to this account, and when it is paid it should be charged to this account, and credited to "Cash" or other suit- able account. 208. ADVANCES FROM OTHER CORPORATIONS. Credit to this account all advances from other corporations to enable the accounting person or 21 corporation to pay for construction or additions and betterments to its plant and equipment, or for any otlier purpose. Tliis account sliould be kept in such manner as to sliow separately the amount ad- vanced for construction and that advanced for other purposes. 209. CONSUMERS' DEPOSITS. Credit to this account all cash deposited with the accounting person or corporation by consumers as security for the payment of water bills. Deposits refunded should be charged to this account and credited to "Cash." Deposits applicable to uncol- lectible or worthless bills should, at or before the close of the fiscal year, be credited to the account of the consumer involved and debited to this account. 210. OTHER ACCOUNTS PAYABLE. Credit to this account all amounts owing to mis- cellaneous creditors on open accounts not else- where provided for. 211. UNEARNED REVENUE. When bills are rendered for water to be supplied in future months, the proportion of the bills appli- cable thereto should be credited to this account. As the term for which the bill is made out expires, the appropriate revenue account should be credited and this account debited with the amount applica- ble to the current month or quarter. 212. OTHER UNFUNDED DEBT. Credit to this account at face value all unfunded debt upon which the company is liable and which is not elsewhere provided for. 22. Reserves. — Reserves shall be classified as Perma- nent and Temporary. 23. Permanent Reserves Defined. — By Permanent Re- serves are meant those that must be maintained intact during the life of the corporation. Perma- nent reserves shall be classified into the two classes: Premiums on Stocks and Other Permanent Reserves. 213. PREMIUMS ON STOCKS. Premiums on stocks should be sub-classified with respect to the several classes of stocks, for defini- tions of which see accounts under the head "Stocks." A sub-account should be kept for each 22 particular class of stock, and such sub-accounts should be severally entitled: Premiums on Debenture Stocks. Premiums on First Preferred Stocks. Premiums on Second Preferred Stocks, etc., and Premiums on Common Stocks. When a premium is realized upon an issue of any- class of stock, such premium should be credited to the sub-account, "Premium on Capital Stock Sold," for that class of stock, and the credit should remain in the account so long as the stock remains out- standing. By "premium realized" is meant the ex- cess of the actual money value of the consideration at the time of issue of the stock over the par value of the stock. If the stock is issued by the corpora- tion to its treasurer or other agent, the excess of the actual money value of the consideration obtain- ed by him over the par value of the stock should be considered the premium realized. 214. OTHER PERMANENT RESERVES. Credit to this account all reserves not above pro- vided for created to remain intact until the dissolu- tion of the corporation. A separate sub-account should be created for each particular purpose for which a reserve is raised, and the purpose of the re- serve should be designated in the title of the ac- count thereof, and should be expressed in full in the first entry in such account. 24. Temporary Reserves Defined. — By Temporary Re- serves are meant those that are not intended to remain intact during the life of the corporation. Temporary Reserves should be classified as Con- tractual Reserves and N on-Contractual Reserves. 215. CONTRACTUAL RESERVES. Contractual Reserves are reserves necessitated by contracts of the corporation, as e. g., reserves to cover sinking funds provided for in mortgages, etc. A separate sub-account should be raised for each particular contractual reserve, and to such account should be credited all appropriations and accumu- lations made in accordance writh the contract pro- visions under which such reserve is created. The purpose of the reserve should be designated in the title of the account thereof, and should be expressed in full in the first entry in such account. 25. Non-contractual Reserves Defined. — Non-contract- ual Reserves are such temporary reserves as are 23 raised without being required under any contract. Non-contractual reserves are divided into Required and Optional. 216. ACCRUED AMORTIZATION OF CAPITAL. Credit to this account such amounts as are charged from time to time to "Operating Ex- penses" or other accounts to cover depreciation of plant and equipment, and other amortization of fixed capital. When any capital is retired from service, the oridnal money cost thereof (estimated, if not known; where estimated, that fact and the facts upon which the estimate is based should be stated in the entry), less salvage, should, except as pro- vided under "Property Abandoned," be charged to this account, and the amount originally entered or contained in the charge to any fixed capital account with respect to property going out of service should be credited to that account, any nec- essary adjusting entry being made to the ap- propriate sub-account under the account "Corpor- ate Surplus or Deficit." Note. — Until otherwise prescribed, the amount estimated to be necessary to cover such wear and tear and obso- lescence and inadequacy as have accrued during the year should be based on a rule to be determined by the account- ing corporation. Such rule may be derived from consid- eration of the said corporation's history and experience. A general statement of the rule used by each company, to- gether with the general information upon which it is based, should be filed with the Board of Public Utility Commis- sioners. 217. UNAMORTIZED PREMIUM ON DEBT. When funded debt securities or other evidences of indebtedness are disposed of for a consideration whose cash value is grreater than the sum of the par value of such securities or other evidences of in- debtedness and the interest thereon accrued at the time the transfer takes place, the excess of the cash value of such consideration received over the sum of the par value of the securities or other evidences of indebtedness and the accrued interest should be credited to this account. At monthly or quarterly intervals thereafter a proportion of such pemium based upon the life of the security or other evi- dence of indebtedness to maturity should be charg- ed to this account and credited to "Amortization of Premium on Debt" in "Income" account. 218. OTHER REQUIRED RESERVES. Credit to this account all required reserves not 24 elsewhere provided for. The first entry of a credit to this account with respect to any particular re- serve should show the purpose of the reserve, and every subsequent entry with respect to that re- serve should designate the reserve to which it re- lates. 26. Optional Reserves. — Optional Reserves are those the creation of which is solely within the discretion of the corporation. For such reserves the following two accounts are provided: 219. CASUALTY AND INSURANCE RESERVE. When any admitted liability arises because of loss or damage to the property of others, or of injuries to employees or other persons, the amount of the lia- bility may (if not previously provided for by insur- ance or self-insurance) be charged to the appropriate operating expense or other accounts and credited to this account, against which (in such case) the actual cost of satisfaction of the liability shall be charged when the matter is determined. If the extent of the liability cannot be ascertained promptly after the lia- bility arises, it may be estimated as accurately as practicable for the purpose of determining the imme- diate charge to the expense or other appropriate ac- count, in which case the matter shall be adjusted when the extent of the liability is definitely ascer- tained. If the loss is of such character that it is in whole or in part indemnifiable under any contract of insurance carried by the corporation, the indemnifi- able portion of the loss shall be charged to the insurer and credited to "Casualty and Insurance Reserve." Also credit to this account the amounts charged to the operating expense account "Insurance" to cover self-carried risks. 220. OTHER OPTIONAL RESERVES. A sub-account should be raised for each particular reserve, and its title should designate the purpose ot such reserve, and the first entry therein should ex- press in full such purpose. 27. Stocks Defined. — By Stocks of a corporation, as the term is here used, are meant those securities which represent 'permanent interests in the corporation or interests which, if terminable, are so only at the op- tion of the corporation. 28. Stocks Classified. — Stocks are classified as follows : Debenture Stocks. First Preferred Stocks. 25 . Second Preferred Stocks, etc. and Common Stocks. 29. Debenture Stocks Defined. — Debenture Stocks are those issued under a contract to pay absolutely there- on at specified intervals a specified return. 30. First Preferred Stocks Defined. — First Preferred Stocks are those which have the first claim upon such dividends as may be distributed. They may be cu- mulative or non-cumulative, participating or non-par- ticipating. If cumulative, the amount by which the dividend at any dividend period fails to reach the stipulated rate is carried forward to continue as a claim upon dividends until satisfied; if non-cumula- tive, such amount lapses. If a first preferred stock is participating, it is not limited to the stipulated rate in the amount of dividends which it may receive, but is entitled to participate, in accordance with the terms of the contract under which it is issued, in further dividends ; if non-participating, it is limited to the stipulated rate. 31. Second Preferred Stocks Defined. — Second Pre- ferred Stocks are those whose claims in the distribu- tion of dividends are next after those of first pre- ferred stocks. These stocks may also be cumulative or non-cumulative, participating or non-participating. 32. Common Stocks Defined. — Common Stocks are those whose claims in the distribution of dividends are subordinate to the claims of all other stocks. 33. Voting Powers. — Stocks differ also in regard to the voting powers incident to ownership of them. 34. Retirements of Stocks. — Stocks are sometimes is- sued under contracts wherein the issuing corporation reserves to itself the right to retire them iX its op- tion, either absolute or subject to conditions ex- pressed in the contracts whereunder the stocks are issued. 221. CAPITAL STOCK ACCOUNTS. In the accounts of stocks outstanding, a separate account should be raised for each class of stock issued, and no two stocks shall be considered of the same class unless they are equal in their in- terest or dividend rights, their voting rights, and the conditions under which they may be retired. The characteristics of any class of stocks in these three 26 regards shall be designated in the title of the account raised to cover such stocks, and shall be clearly ex- pressed in the first entry in such account. To the account for any class of stocks should be credited when issued the par value of the amount of stock of that class issued. If such issue is for money, that fact shall be stated; and if for any other considera- tion than money, the person to whom issued shall be designated, and the consideration for which issued shall be described with sufficient particularity to iden- tify it ; if such issue is to the treasurer, or other agent of the corporation, to be disposed of by him for the benefit of the corporation, that fact and the name of such agent shall be shown; and such agent shall in his account of the disposition thereof ."?how the like details concerning the consideration realized there- on, which account when accepted by the corporation shall be preserved as a corporate record. If the fair cash value of the consideration realized upon the is- sue of any amount of stock is greater than the par value of such stock, the excess shpuld be credited to the account "Premiums on Stocks," and correspond- ing reference thereto shall be contained in the entry relating to such stock in the stock account. 222. CORPORATE SURPLUS. Under this head should be shown the credit bal- ance, if any, in the "Corporate Surplus of Deficit Account." 27 FIXED CAPITAL ACCOUNTS. /. INTANGIBLE FIXED CAPITAL. 101. ORGANIZATION. Charge to this account all fees paid to governments for the privilege of incorporation, and all office and other expenditures incident to organizing the corpora- tion or other enterprise and putting it in readiness to do business. This includes cost of preparing and distributing prospectuses, cost of soliciting subscrip- tions for stock (but not for loans nor for the pur- chase of bonds or other evidences of indebtedness), cash fees paid to promoters and the actual cash value at the time of organization of securities paid to pro- moters for their services in organizing the enterprise, counsel fees, cost of preparing and issuing certifi- cates of stock and cost of procuring certificates of necessity from State authorities and other like costs. Like costs incident to preparing and filing certificates of authorization of increase in capital stock, and to the negotiation and issue of stock thereunder, and cost of preparing and filing certificates of amend- ment of articles of incorporation should also be charged hereunder. This account shall not include any discounts upon stocks or other securities issued, nor shall it include any costs' incident to negotiating loans or selling bonds or other evidence of indebted- ness. 102. FRANCHISES. Charge to this account "the amount (exclusive of any tax or annual charge) actually paid to the State or any political sub-division thereof as the considera- tion of such franchise" (Section III, Paragraph 18 (f). Chapter 195, Laws of 1911). If any such fran- chise is acquired by mesne assignment, the charge to this account in respect thereof must not exceed the amount actually paid therefor by the corporation to its assignor, nor shall it exceed the amount specified in the statute above quoted. Any excess of the amount actually paid by the corporation over the 28 amount specified in the statute shall be charged to the account "Other Intangible Capital." If any such franchise has a life of not more than one year after the date when it is placed in service, it shall not be charged to this account tut to the appropriate ac- counts in "Operating Expenses," and in "Prepay- ments," if extending beyond the fiscal year. Note. — ^Annual or more frequent payments in respect of franchises must not be charged to this account but to the appropriate tax or operating expense account. 103. PATENT RIGHTS. Charge to this account the cost of all rights (hav- ing a life of more than one year from the date when placed in service) acquired by the corporation in or under valid patents granted by the United States to inventors for inventions and discoveries which are necessary to the economical conduct of the cor- poration's water operations. 104. OTHER INTANGIBLE WATER CAPITAL. Charge to this account the cost of all other prop- erty coming within the definition of intangible cap- ital and devoted to water operations. All entries of charges to this account shall describe the acquired property with sufficient particularity clearly to iden- tify it, and shall also show specifically the principal from whom acquired and all agents representing such principal in the transaction; also the term of life of such property, estimated if not known, and if esti- mated, the facts upon which the estimate is based. //. WATER COLLECTING SYSTEM. Charge to the appropriate accounts hereunder the cost of all land, structures and equipment used in collecting water and conveying it from the place of its collection to the purification or pumping plant, or, in the case of a purely gravity system, to a point, in or out of the municipahty, from which water is distributed to consumers. 105. WATER DIVERSION RIGHTS. This includes the cost of all water diversion rights (as distinguished from water power rights), mean- 29 ing thereby the cost of acquiring from riparian land owners the right to divert for supply purposes the waters of any stream, and from neighboring land owners the right to draw from ground water sources of supply; also compensation and costs in connection therewith paid for abating, modifying or abandoning causes of allowable pollution of streams and ground waters used for supply; whether such rights are ac- quired or compensated for in perpetuity or for a definite term of more than one year. 106. RESERVATIONS. This includes the cost of all land for reservations along sources of supply, and also the cost of all buildings erected thereon and used in connection therewith, as well as all equipment, etc. 107. IMPOUNDING DAMS AND RESERVOIRS. This includes the cost of the land and all struc- tures thereon used for impounding water for supply purposes at the sources of supply. 108. LAKE AND RIVER CRIBS. This includes the cost of all land, including lake or river bed, and all structures thereon used for col- lecting waters for supply purposes. 109. SPRINGS AND WELLS. This includes the cost of all land and all struc- tures thereon used for collecting water from springs, and of the wells for obtaining ground waters, includ- ing the curbing or casing of wells, but not including any equipment for pumping water at wells. 110. INFILTRATION GALLERIES AND TUN- NELS. This includes the cost of the land and rights of way, and all structures thereon and therein, used for collecting waters. 111. COLLECTING CONDUITS AND RESERVOIRS This includes the cost of the land and rights of way, and all structures thereon and therein, used for collecting waters from various sources and storing in reservoirs ready for purification, pumping or dis- 30 tributing, or for conveying to the purification or pumping plant, or the distribution system (if a pure- ly gravity system). 112. GRAVITY INTAKES AND SUCTION MAINS. This includes the cost of all land and rights of way and all structures thereon and therein, used for bringing water by gravity or suction, from the source of supply to the purification or pumping plant. 113. AQUEDUCTS AND SUPPLY MAINS. This includes the cost of all land and rights of way and all structures thereon and therein, used for bringing water by aqueducts or supply mains, from the source of supply to the purification or pumping plant, or to the distribution system (if a purely gravity system). ///. PURIFICATION SYSTEM. Charge to the appropriate accounts hereunder the cost of all land structures and equipment used in connection with the purification of water, in con- veying water from one part of the purification sys- tem to another, including steam or other power plant and pumping equipment when such power plant and pumping plant is used in connection with the delivery of wash water for filter or sand washing, but not including any steam or other power plant and pump- ing equipment which is used for pumping the water supply from one part of the purification works to another. 114. SETTLING BASINS. This includes the cost of the land and all struc- tures thereon for the sedimentation of water without coagulation whether such sedimentation is preliminary to supply or a preliminary step in conjunction with the further purification of water by some additional process; also the valves and con- nections with the succeeding step in the purification process or the mains or other means of conveyance to the pumping plant or the distribution system (if a purely gravity system). 31 lis. COAGULATING BASINS. This includes the cost of the land and all struc- tures thereon used for the coagulation of water, whether such coagulation is preliminary to supply or I a step in conjunction with the further purification by some additional process, or whether used as a step \ in purification following sedimentation; also the cost of equipment, such as coagulant mixing and storage < tanks, orifice boxes and feeder equipment, valves and I connections with the succeeding step in the process, ' or the mains or other means of conveyance to the pumping plant or distribution system (if a purely gravity system), appliances for cleaning out basins, etc. 116. SOFTENING AND IRON REMOVAL PLANT. This includes the cost of the land and all struc- tures thereon used for the process of water soften- ing and iron removal; also all equipment and appli- ances connected with and forming a part of the softening or iron removal plant including all connec- tions with the succeeding step in the purification pro- cess or the mains or other means of conveyance to the pumping plant or the distribution system (if a purely gravity system), appliances for cleaning out basins, etc. 117. FILTERS. This includes the cost of the land and all struc- tures thereon used for filtration purposes, whether such filters be "roughing filters," "slow sand filters," or "mechanical" filters; also all equipment and ap- pliances forming a part of such filters, cleaning and sand washing equipment, etc., and all connections with the succeeding step in the purification process or the mains or other means of conveyance to the pumping plant or the distribution system (if a purely gravity system), mechanical and air agita- tion equipment with the power plant therefor. xl8. OZONE STERILIZING AND AERATION PLANT. This includes the cost of the land and all struc- tures thereon used for the process of water purifica- Z2 tion or treatment by the ozone sterilizing or aeration process, including all equipment or appliances con- nected or forming a part of the plant, and all connec- tions with the succeeding step in the purification pro- cess, or the mains or other means of conveyance to the pumping plant or the distribution system (if a purely gravity system). 119. CHEMICAL TREATMENT PLANT. This includes the cost of the land and all struc- tures thereon used for the chemical treatment of water, whether such treatment is preliminary or sub- sequent to some further or preceding process of puri- fication or treatment of water by some additional process or whether such chemical treatment is th.e sole method of treatment of the water supply. Included here are all buildings, equipment and ap- pliances such as mixing tanks and gravity or pump feed apparatus, basins, if any, and all connections with the next step in the purification process, or the mains or other means of conveyance to the pump- ing plant or the distribution system (if a purely gravity system). 120. CLEAR WATER BASINS. This account is provided only for the use of com- panies which employ some system or method of puri- fication, and to it should be charged the cost of the land and all structures thereon used for the storing of water either in process of purification as an interme- diate step in the purification system, or as the final storage of purified water ready for delivery, to the pumping plant or the distribution system (if a purely gravity plant). This account includes also the cost of equipment and appliances and connections from the clear water-basins to the suction or wet wells for pumping or to the pumps direct, or to the supply or suction main or other means of conveyance to the pumping plant or distribution system. IV. PUMPING SYSTEM. Charge to the appropriate accounts hereunder the cost of all land, buildings and equipment used in con- nection with the pumping of water. 33 121. PUMPING STATIONS. This includes the cost of land and all buildings thereon, forming a part of the pumping system, in- cluding out-buildings, tool houses, shops, etc., and all appurtenant walks, fences, drives, and all per- manently attached fixtures forming a part thereof. 122. STEAM POWER PUMPING EQUIPMENT. This incktdes the cost of all steam plant and equip- ment, and the accessory equipment such as boilers and their settings, stacks and foundations, fuel and ash handling and storage equipment, super-heaters, economizers, damper regulators, and all piping, etc., and other appliances. 123. HYDRAULIC POWER PUMPING EQUIP- MENT. This includes the cost of all land other than that occupied by the pumping station and buildings, to- gether with the cost of all water power rights (as distinguished from water supply diversion rights) and the cost of all structures provided exclusively for the development of hydraulic power, such as dams, headgates, canals, flumes, relief structures, and appurtenant power generating equipment, such as wa- ter wheels with control equipment and/ power trans- mission equipment from water wheels to pumps and also pumps and pumping equipment, etc. 124. ELECTRIC POWER PUMPING EQUIPMENT. This includes the cost of all equipment used for pumping water by electric power, whether such power is purchased or generated by the company it- self, also the pumps and pumping equipment and all appurtenant equipment and appliances. 125. GAS POWER PUMPING EQUIPMENT. This includes the cost of all equipment used for pumping water by gas power, whether such power is obtained from purchased gas, or from producer gas plant. Included here are the cost of gas pro- ducer plants and apparatus, gas storage and trans- mission equipment, gas engines, pumps and pump- equipment, etc. 34 126. MISCELLANEOUS PUMPING EQUIPMENT. This includes the cost of all equipment, apparatus and appliances used in connection with the pumping plant but not properly includible in any of the pre- ceeding accounts. V. DISTRIBUTION SYSTEM. 127. TRANSMISSION MAINS AND ACCESSORIES. Charge to this account the cost of all land and rights-of-way and of all main pipes and special cast- ings, valves and valve vaults and boxes, etc., belong- ing to the transmission system and all other accessor- ies to the transmission mains. By transmission mains are meant those which convey water for long distances without having any connections thereto for service therefrom, from the pumping station to the distributing storage reservoir or the distributing sys- tem mains. Transmission mains apply only in the case of water works operating pumping stations; in the case of gravity systems these mains would come under the designation of supply or distribution mains. 128. STORAGE RESERVOIRS, TANKS AND STANDPIPES. Charge to this account the cost of all land, reser- voirs, tanks and standpipes with the appurtenant buildings, structures and equipment connected there- with, used for the storage of water preliminary to its distribution for consumption. 129. DISTRIBUTION MAINS AND ACCESSORIES. Charge to this account the cost of all land and rights-of-way for main pipe lines and the cost of all vnain pipes and special castings used for distribution of water to customers. (Data as to the length of pipe of each diameter and the date of their installa- tion should be carefully kept.) Also the cost of all gate valves in the distribution mains, together with the boxes over such valves, and the cost of installing the valves and boxes. Also the cost of all special fixtures and appliances connected to the main pipes together with the cost of installing same, such as 35 regulating valves, air chambers, relief valves, blow- off cocks, flush plugs, etc. 130. SERVICE PIPES AND STOPS. Charge to this account the cost of material and labor including all other costs and charges incurred in connection therewith; such as permit fees, etc., accruing in the installation of service pipes and stops from main pipes to the customers' premises, when it it the policy of the company that such costs shall be capitalized, and when costs of the services so installed are not borne by the customer, although the company may have full control over the same, 131. METERS, METER BOXES AND VAULTS. Charge to this account the cost of all meters, meter boxes and meter vaults, together with the cost of their installation, which are furnished on customers' service connections without charge to the company. 132. FIRE HYDRANTS AND FIRE CISTERNS. Charge to this account the cost of all hydrants and fire cisterns together with the cost of pipe, valves, etc., connecting same with distribution main pipes, and the cost of installing same. 133. FOUNTAINS, TROUGHS, AND OTHER EQUIPMENT. Charge to this account the cost of all fountains, troughs, and other equipment and appliances for the utilization of the water supply by the general pub- Uc, together with the cost of their connection and in- stallation, which are installed at the cost of and are owned by the company. VI. MISCELLANEOUS PROPERTIES. 134. GENERAL STRUCTURES. Charge to this account the cost of all land, build- ings and other structures used for general offices, laboratories, general store-houses, general stable buildings, shops, etc., which are not includible in any of the foregoing accounts; also the cost of all fix- tures permanently attached thereto and made a part thereof, such as water pipes and fixtures, steam 36 pipes and fixtures for warming and ventilating, gas pipes and fixtures for lighting, etc., electric wiring and fixtures for lighting, signaling, etc., elevators, etc., and the engines and motors specially provided for operating them; furnaces, boilers, etc., specially provided for producing steam for such engines and for heating; electric generators specially pro- vided for producing current for lighting such buildings, etc. This account includes such piers and other foundations for machinery and apparatus as are designed to be as permanent as the buildings in (or in connection with) which they are constructed, and to outlast the first machinery or apparatus mounted thereon. 135. GENERAL EQUIPMENT. Charge to this account the cost of all equipment of general structures, as provided under the foUow- heads : a. General Office Equipment: This includes the cost of all equipment of general offices, such as desks, chairs, tables, movable safes, filing cases, drafting-room equipment, and other like office appliances and equipment; also engineering instru- ments. b. General Shop Equipment: This includes the cost of all equipment specially provided for general shops, such as furnaces, boilers, gas producers, en- gines, electric generators, and other power ap- paratus used in operating machinery in such shops; machine tools, cranes, hoists, shafting, belts, and the like shop equipment; also such smithing equip- ment in general shops as is used principally for other general purposes than shoeing horses and re- pairing vehicles. Note. — Hand and other small portable tools liable to be lost or stolen should not be included herein, but portable tools and apparatus of special value may be charged to this account and remain therein so long as record is kept of the persons to whom such tools and apparatus are issued and such persons are made responsible therefor. c. General Store Equipment: This includes the cost of all equipment of general store structures. 37 such as movable counters, movable shelving, and other movable equipment of like nature, carts, bar- rows, trucks, etc., and other apparatus and appli- ances used in handling materials and supplies. Note. — Counters, shelving, and the like, which are permanently attached to the structure should be charged to account No. 134, "General Structures," and not to this account. d. General Stable Equipment : This includes the cost of all equipment of general stables, including horses, harness, drays, wagons, automobiles, and other vehicles, equipment of shoeing shops, harneis repair shops, vehicle repair shops, etc. 136. OTHER TANGIBLE WATER CAPITAL. Charge to this account the cost of all tangible prop- erty devoted to water operations not elsewhere pro- vided for. VII. MISCELLANEOUS CONSTRUCTION EX- PENDITURES. 137. ENGINEERING AND SUPERINTENDENCE. Charge to this account all expenditures for services of engineers, draftsmen and superintendents em- ployed on preliminary and construction work and all expenses incident to the work, when such disburse- ments can not be assigned to specific construction. Note. When employees enumerated above are engaged in work not chargeable to construction, their pay and expenses should be charged to the specific work on which engaged. 138. LAW EXPENDITURES DURING CONSTRUC- TION. Charge to this account general expenditures of the following nature incurred in connection with the con- struction of a water works; namely, the pay and ex- penses of all counsel, solicitors, and attorneys, their clerks and attendants, and expenses of their offices ; printing briefs, legal forms, testimony, reports, etc.; payments to arbitrators for the settlement of disputed questions; cost of suits and payments of special fees, notarial fees, and witness fees; and expenses con- 38 nected with taking depositions; also all legal and court expenses. When any of the expenditures above enumerated can be charged directly to the account for which in- curred, they should be so charged and not to this ac- count. Law expenditures in connection with the or- ganization of the corporation should be charged to account No. loi, "Organization." 139. INJURIES DURING CONSTRUCTION. Charge to this account all expenditures incident to injuries to persons when caused directly in connec- tion with construction of water plant and equipment; proportion of salaries and expenses of physicians and surgeons; nursing and hospital attendance, medi- cal and surgical supplies, artificial limbs, railroad and carriage fares for conveying injured persons and at- tendants; funeral expenses (including payments to undertakers) ; proportion of pay and expenses of claim adjusters and their clerks, and pay and ex- penses of employees and others called in consultation in relation to the adjustment of claims coming under this head; witness fees and amount of final judg- ments ; also cost of liability insurance applicable to construction. 140. TAXES DURING CONSTRUCTION. Charge to this account all taxes and assessments levied and paid on property belonging to the corpora- tion while under construction and before the plant is opened for commercial operation, except special taxes assessed for street and other improvements, such as grading, sewering, curbing, guttering, paving, sidewalks, etc., which should be charged to the ac- count to which the property benefited is charged. 141. MISCELLANEOUS CONSTRUCTION EXPEN- DITURES. This account includes the salaries and expenses of executive and general officers of a water works under construction ; clerks in general offices engaged on con- struction accounts or work; rent and repair of gen- 39 eral offices when rented, and office expenses; insur- ance during construction other than liability insur- ance ; also all construction and equipment items of a special and incidental nature which cannot properly be charged to any other account in this classifica- tion. Note A. — ^This account may include a suitable propor- tion of store expenses when such expenses are not assign- able to specific materials. Note B. — ^This account should not include any costs of organization, or any costs or discounts connected with the issue and disposal of stocks, funded debt, or other securities, and commercial paper. 142. INTEREST DURING CONSTRUCTION. This account includes the interest accrued upon all moneys, and credits available upon demand, ac- quired for use in connection with the construction and equipment of the property from the time of ac- quisition until the construction is ready for use. In- terest receivable accrued upon such moneys and credits Should be credited to this account. To this account should also be credited discounts realized through prompt payment of bills for materials and supplies used in construction, unless such discounts are credited to the particular bills. 40 SCHEDULE B. INCOME ACCOUNT. 1. Income and Indicant Accounts Compared. — A comparison of the balances in the foregoing accounts (Schedule A) at any particular time will, if the accounts have been properly kept, show the then existing condition of a corporation's affairs, so far as such condition can be shown through the accounts. The group of accounts just defined is sometimes called the Balance Sheet or Indicant accounts. Their balances indicate the condition of the corporation at any particular time. These accounts, with their subsidiary accounts, are all that are necessary prior to the time when the corporation becomes what may be called a "going concern." When a corporation begins operations it requires an additional group of accounts in which to classify in con- venient form the accounting history of the various changes it undergoes. Such group of accounts brings together or accumulates the account of the various incidents of the corporation's history. This group of accounts may be called the Income account. They are made up usually on a yearly basis and are closed into one grand account, called! "Corporate Surplus or Deficit," which ties together this group of accounts and the preceding group. The follow- ing are the accounts which make up the income account statement : 300. OPERATING REVENUES. This account includes the total operating revenues for the period covered by the income account state- ment. For the primary revenue accounts, see pages 50, 51. 400. OPERATING REVENUE DEDUCTIONS. This account includes the total operating expenses and revenue deductions for the period covered by the income account statement. For the primary operat- ing expense and revenue deduction accounts see pages 53-65. 2. Non-Operating Revenues Defined. — By Non-Oper- ating Revenues are meant those derived as a return upon 41 the property of the accounting person or corporation in the hands of others or from its interests in property in the hands of others. For such revenues are provided the fol- lowing accounts: 501. RENTS ACCRUED FROM LEASE OF WATER PLANT. Credit to this account monthly or quarterly, as they accrue, all revenues from the accounting per- son's or corporation's interests in water plant or equipment held by others under some form of lease whereby it surrenders possession of such property. This account contemplates that the taxes on property so held are payable by the tenant in possession and charged by him to the appropriate tax account. If under the contract of lease such taxes are payable by the lessor or its assignee, such taxes should be charged to this revenue account and not to any of the lessor's tax accounts nor to any of its expense accounts. 502. MISCELLANEOUS RENT REVENUES. Credit to this account monthly or quarterly, as they accrue, all miscellaneous rent revenues from lease of property other than water plant or equipment. Such revenues should be classified as follows: (a) Leasehold Revenues: All revenues from any lease the entire term of which is greater than one year. This account contemplates that the taxes on property so leased are payable by the lessee and are charged by him to the appropriate tax account. If under the contract of lease such taxes are payable by the lessor or its assignee, they should be charged to this revenue account, and not "to any of the lessor's tax or expense accounts. (b) Other Rent Revenues: All revenues from any lease or contract the entire term of which does not exceed one year, or which is held at will or upon sufferance. This account contemplates that the tax on property so leased are payable by the landlord and are charged by him to the appropriate tax ac- count. If under the contract of lease the taxes are payable by the tenant, the amount of such taxes 42 should be credited to this account as they accrue, and should correspondingly be charged to the appropriate tax account. 503. INTEREST REVENUES. Credit to this account as they accrue all : (a) Interest from Investments: All interest accruing to the corporation on such of its interest- bearing investments (as hereinbefore defined) as are liabilities of solvent concerns and individuals. (b) Interest from Other Sources: All interest accruing to the corporation upon its interest-bearing current assets, special deposits, and all other assets not provided for under the foregoing sub-head, where such interest is a liability, actual or contingent, of solvent concerns and individuals. Note. — Entries in this account must be made in such wise as to show separately the classes above indicated, which will he required to be stated separately in the an- nual reports to the Board of Public Utility Commissioners. 504. DIVIDEND REVENUES. Credit to this account at their cash value, and as of date when collectible, dividends declared by solv- ent concerns on stocks held by the accounting cor- poration among its investments. 505. MISCELLANEOUS NON-OPERATING REVE- NUES. Credit to this account all non-operating revenues accruing to the company and not provided for in any of the foregoing accounts. 506. NON-OPERATING REVENUE DEDUCTIONS. Charge to this account all matters provided for under the following sub-accounts: (a) Rent Expense: This sub-account includes all expense arising in connection with the procuring of revenues from property let out to others, including the cost of negotiating contracts, advertising for ten- ants, fees paid conveyancers, collector's commissions, cost of enforcing payment of rent, cost of ousting tenants, etc., and all other expense arising in connec- tion with such property. This applies only to leases 43 conveying the property out of the possession of the corporation, and it includes the expense accruing while the property is idle and awaiting an occupant. This sub-account includes cost of maintenance of the property when such cost is borne by the corporation. Such maintenance includes depreciation as well as repairable wear and tear. It does not include taxes. (b) Interest Expense : This sub-account includes all expense arising in connection with procuring inter- est upon investments, such as expense of collection, expense of investigating delay in payment, expense of enforcing payment, and the like. It does not in- clude taxes on such investments. (c) Dividend Expense: This sub-account includes all expense arising in connection with the collection of dividends on stock of other corporations; also all expense incurred in the investigation of the affairs of the corporation whose stocks are held, whether for the purpose of detecting mismanagement or for the purpose of inducing the declaration of dividends, and all expense connected with enforcing payment of dividends when declared. It does not include taxes on such investments. (d) Miscellaneous Non-Operating Expense: This sub-account includes all non-operating expense which is not provided for in the foregoing sub-ac- counts. (e) Non-Operating Taxes: This sub-account in- cludes all taxes accruing upon non-operating property and all assignable to non-operating revenues. (f) Uncollectible Non-Operating Revenues: When any non-operating revenues are judged by the corporation to be uncollectible, the amount thereof should be credited to the account in which theretofore carried and charged to this sub-account. Note.— In annual reports of corporations to the Board of Public Utility Commissioners this account will 'be re- quired to be fully analyzed. Income Deductions Defined.— The sum total of the credit balances in the revenue accounts for any par- ticular operation at the close of a fiscal period gives the gross revenue from that operation for that pe- 44 riod. This gross revenue diminished by operating expenses, taxes and uncollectible bills assignable to such operation for that period gives the income from that operation for the period. Similarly, for non- operating revenues, the non-operating expenses and non-operating taxes. The aggregate of the income from the several operations and the non-operating in- come is the gross income applicable to corporate and leased properties. Gross income is ordinarily subject to various compulsory deductions, mostly contractual, which are hereinafter called Income Deductions. 511. INTEREST ACCRUED ON FUNDED DEBT. Charge to this account monthly or quarterly all interest accrued on outstanding funded debt issued or assumed by the company, and credit the amount so charged to account No 204, "Interest Accrued." This account does not include interest on securities held by the company in its treasury, in sinking or other reserve funds or pledged as collateral. 512. OTHER INTEREST DEDUCTIONS. Charge to this account monthly or quarterly all interest accrued on receiver's certificates and on all interest-bearing unfunded obligations of the com- pany. 513. RENT FOR LEASE OF OTHER WATER PLANT AND EQUIPMENT. Charge to this account all amounts accrued against the accounting person or corporation for rent of water plant and equipment which it holds under some form of lease from another company or corporation and of which it has the exclusive possession. Taxes accrued on such plant and equipment should not be charged to this account, but to the appropriate Taxes account. If under the contract of lease such taxes are payable by the lessor or reversioner, they should be credited to this account and charged to the appropriate Taxes account. When paid by the lessor or reversioner, they should be charged to its rent revenue account, and not to its Taxes account, to the end that taxes upon such plant and equipment may be reported by the corporation in possession. 45 514. MISCELLANEOUS RENT DEDUCTIONS. Charge to this account the matters provided for in the following sub-accounts: (a) Joint Facility Rents: When any plant or equipment is maintained or operated by another cor- poration for the joint benefit of the accounting cor- poration and others under a joint arrangement for sharing the expense (on the basis of the relative amounts of benefit to the several participants), if such joint arrangement provides for including in the charge against the accounting corporation any pure rent, profit, or return upon such plant or equipment over and above depreciation and other expense of maintenance and operation, such pure rent, or profit, or return upon property shall be charged to this sub- account. (b) Miscellaneous Rent Deductions: This sub- account includes all miscellaneous rents payable not elsewhere provided for. 515. MISCELLANEOUS DEDUCTIONS FROM IN- COME. Charge to this account monthly or quarterly all matters provided for under the following heads: Sinking Fund Accruals: This head includes all accruals required to be made to sinking funds in ac- cordance with the provisions of mortgages or other contracts requiring the establishment of sinking funds. All accruals to sinking or other funds created volun- tarily by the corporation and not in pursuance of the provisions of any mortgage or other contract or of the requirements of law shall be excluded here- from. Guaranties of Periodic Payments: This head includes all unsecured accruals of obligations arising under contracts whereby the corporation has guaran- teed the annual or more frequent periodic payment of money or performance of other obligation on the part of another corporation or person, and because of the default or such other corporation or person the lia- bility of the present corporation has become actual. This sub-account does not include such matters as guaranties of payment of principal of funded debt 46 and other similar things relating to a series of years, nor does it include any guaranties for which the cor- poration has protected itself through taking ample security. If insufficient security has been taken in respect of such annual or more frequent payments, the unsecured portion thereof shall be charged here- under. Loss ON Operations of Others: Whenever in accordance with the terms of any contract the cor- poration is bound to contribute toward rei;nburse- ment of the losses resulting from the operations of others, all liabilities accruing to the corporation from such source shall be charged hereunder. Other Contractual Deductions from Income: This head includes all contractual liabilities arising from annual or other more frequent periodic matters and not includible under any of the foregoing heads. This sub-account includes only deductions from in- come, and not any liabilities arising in exchange for goods or other things purchased. Note. — A complete analysis of this account will be re- quired in the annual reports to the Board of Public Util- ity Commissioners. 516. AMORTIZATION DEDUCTIONS. Charge to this account in accordance with the fol- lowing directions : Amortization of Landed Capital: Under this head charge to this account at the close of any fiscal period such proportion of the original money cost (estimated, if not known) of landed capital as is necessary to cover the proportion of the life thereof expired during such period. Note A. — ^The amounts charged to this account under this head shall be concurrently credited to account No. 216, "Accrued Amortization of Capital." Note B. — When any landed capital expires or is other- wise retired from service (as e.g., through sale), the capital account or other indicant account (if any) origin- ally charged therewith shall be credited with the amount originally charged, and this amount, less the proceeds of sale (if any), should be charged to account No. 215, "Ac- crued Amortization of Capital," any necessary adjusting entry being made to an appropriate sub-account under the account, "Corporate Surplus or Deficit." 47 Amortization of Debt Discount and Expense: Under this head charge to this account at or before the close of any fiscal period that proportion of the unamortized discount and debt expense on outstand- ing debt which is applicable to the period. This pro- portion shall be determined according to a rule, the uniform application of which during the interval be- tween the issue and the maturity of any debt will completely amortize or wipe out the discount at which such debt was issued and the debt expense connected therewith. Amortization of Premium on Debt — Cr. : Under this head credit to the account at or after the close of any fiscal period the proportion of the premium at which outstanding debt was issued which is applicable to the period. This proportion shall be determined according to a rule the uniform application of which during the interval between the issue and the maturity of any debt will completely amortize or wipe out the premium at which such debt was issued. 4. Appropriation Accounts Defined. — The balance re- sulting from closing the foregoing income deduction accounts for any fiscal period into Gross Income for that period gives the Net Income for the period, which should be closed into "Corporate Surplus or Deficit" account. The group of accounts which show for any fiscal period the changes in the corporate surplus are designated the "Appropriation Accounts," for the reason that substantially all of them are sub- ject only to the discretion of the corporation. At the end of each fiscal period the several "Appropriation Accounts" should be closed into the "Corporate Sur- plus or Deficit" account. 521. BAD DEBTS COLLECTED. When any debt theretofore written oflf as a bad debt is collected, the amount of the collection shall be credited to this account. Expense involved in such collection shall be charged to this account. jjOTE. — Such "uncollectrble 'bills" as are provided for under account No. 423 should not be included in this ac- count. 48 522. OTHER ADDITIONS TO SURPLUS. Credit to this account all additions to surplus be- cause of erroneous accounting in prior fiscal periods, and all other additions to surplus not elsewhere pro- vided for. 523. EXPENSES ELSEWHERE UNPROVIDED FOR. Charge to this account all expenses not chargeable as a part of operating expenses or of non-operating expenses, such as fines levied on the corporation for violation of law, for misfeasance, for non-feasance, etc., fines levied on directors, officers and other em- ployees and assumed by the corporation, donations to funds, to churches and other associations, and other like expenses and outgoes. 524. DIVIDENDS ON OUTSTANDING STOCKS. When any dividend is declared upon any outstand- ing stocks of the corporation the amount of such dividend shall thereupon be charged to this account. All entries to this account shall show the amount of stock upon which the dividend is declared, the class of such stock, and the rate of the dividend, as well as the amount thereof ; and if the dividend is payable in any other thing than money, such thing shall be described in the entry with sufficient particularity to identify it, and the actual money value thereof shall be stated as the amount of the dividend. When any dividend is declared upon the stocks of the corporation held in its treasury, the amount of such dividend thereon shall be credited to this account. Entries of credits to this account shall be made with the same degree of particularity as is prescribed in the preceding paragraph. 525. MISCELLANEOUS APPROPRIATIONS. Charge to this account monthly or quarterly all matters provided for under the following heads: Amortization Elsewhere Unprovided For: This head includes such amortization as is not elsewhere provided for. This sub-account provides for all op- tional amortization, such as that of discount on stocks outstanding, abandoned property, etc. 49 Appropriations to Reserves: This head inchides all optional appropriations to reserves. Gifts to Controlled Corporations: This head includes all gifts made by the corporation to its con- trolled corporations; also such portions of all ad- vances thereto as are not carried as assets. Other Appropriations: This head includes all optional appropriations made by the corporation and not elsewhere provided for. 526. BAD DEBTS WRITTEN OFF. Charge to this account the amount by which debts are written off from the accounts of the corporation when they become stale and are placed in the "bad debt" class. Note. — Such uncollectible bills as are provided for under account No. 423 should not be included in this account. 527. OTHER DEDUCTIONS FROM SURPLUS. Charge to this account all deductions from surplus because of erroneous accounting in prior fiscal pe- riods, and all other deductions from surplus not else- where provided for. Note. — A complete analysis of this account will be re- quired in the anmal reports of corporations to the Board of Public Utility Commissioners. 50 OPERATING REVENUE ACCOUNTS. Operating Revenues Defined. — By operating revenues are meant all amounts of money which the company or municipality receives or becomes law- fully entitled to recover for services rendered, for products sold, or as a return upon property used by the company or municipality in its own operations. Credits to the various revenue accounts should be made upon the basis of bills rendered or of gross prices. Discounts for prompt payment, corrections of overcharges, overcollections theretofore credited and afterward corrected, authorized abatements and allowances, and other corrections and deductions shall be charged to the revenue account to which they relate. 301. METERED PRIVATE SERVICE. Credit to this account all revenues accruing to the company or municipality for water supplied through meters to all regular private consumers. 302. UNMETERED PRIVATE SERVICE. Credit to this account all revenues accruing to the corporation or municipality for water furnished at flat or fixture rates to all regular private consumers. 303. SERVICE TO OTHER WATER SUPPLY SYS- TEMS. Credit to this account all revenues accruing to the company or municipality for water furnished to other water supply systems, whether operated by a munici- pality or by a private corporation or individual. 304. MUNICIPAL WATER SERVICE. Credit to this account all revenues accruing to the company or municipality for water supplied for mu- nicipal purposes, such as fire protection, sewer flush- ing, street sprinkling, and also all water supplied to public buildings, public parks, fountains, troughs, etc. Water furnished for municipal purposes by muni- 51 cipal water systems, whether or not any revenues are collected therefor, should be credited to this account, and in case no revenues are collected, the amount so credited should be charged to account No. 525, "Mis- cellaneous Appropriations." 305. MISCELLANEOUS WATER SERVICE. Credit to this account all revenues accruing to the company or municipality for water furnished to builders or street paving contractors, to circuses and to those using water for a limited period of time without permanent service connection, and for all other water service not elsewhere provided for. 306. MISCELLANEOUS OPERATING REVENUES. Credit to this account all revenues accruing to the company or municipality for services rendered in con- nection with water operations, other than supplying water, such as fees for shutting off and turning on water, tapping mains, etc. 52 OPERATING EXPENSE ACCOUNTS. 1. Operating Expenses Defined.- — By operating ex- penses are meant such expenses as are necessary to the maintenance of the corporate organization, the ren- dering of services required or authorized by law, the sale of merchandise, the production (including here- in property consumed) and disposition of the commo- dities produced, and to the collection of the revenues therefor. Expenses directly incident to the collection of non-operating revenues and the maintenance of the property from which non-operating revenues are derived should be excluded from operating expenses. 2. Definitions of Certain Terms Used in Connection with Expense Accounts. — Except where some other meaning is clearly specified in the definitions of the accounts, the following words, whereever used hereunder, have the meaning below stated: Cost means cash or money cost, and not price based on a term of credit. Labor means human services of whatever charac- ter. Cost of labor includes wages, salaries, and fees paid to persons for their services. Cost of materials and supplies includes all specifi- cally assignable transportation charges incurred in ob- taining the delivery of such materials and supplies upon the premises of the purchaser, and cost of any special tests made thereon prior to their acceptance; and in case the accounting person or corporation de- sires, it may include a suitable proportion of store expenses (when the materials and supplies are passed through stores) and the cost of further transpor- tation to the place of consumption, and a suitable proportion of the expenses of the purchasing depart- ment, in which case a corresponding credit should be made to the suitable expense account as hereinafter provided. Cost of repairs, when made by the accounting per- son or corporation, includes cost of labor expended and material consumed, less salvage, if any. By re- 53 pairs are meant the replacement of some part or parts of any structure, facility, or unit of equipment, the extent of which replacement does not amount to a substantial change of identity in such structure, fa- cility, or unit of equipment. Replacements of the lat- ter sort are to be excluded from operating expenses and charged to the appropriate fixed capital accounts, the cost of the item replaced being credited thereto. The accounts for operating expenses, or what may be termed "Water Service Expenses," are arranged in three groups or sub-divisions: Water Supply Ex- penses, Maintenance Expenses, and General and Miscellaneous Expenses. I. Water Supply Expenses are those which rep- resent the costs of materials and services other than those for repairs, which are directly connected with the collection, purification, pumping and dis- tribution of water. II. Maintenance Expenses are those which rep- resent the costs of services and materials incident to the repair of the properties devoted to water ser- vice operations, and the losses arising from the de- preciation of those properties. III. General and Miscellaneous Expenses in- clude all costs which are incident to the general management of the water works as a business en- terprise, and those relating to the business as a whole, which are not elsewhere provided for. I. WATER SUPPLY EXPENSES. 401. COLLECTING SYSTEM EXPENSES. Charge to this account the operating costs or ex- penses of, or connected directly with, the several parts of the entire water supply system which are included in accounts Nos. 105-113. This includes all wages and expenses for inspecting and policing, caretakers and other employees, but does not include repairs. Also charge to this account the cost of all water purchased to be distributed by the accounting per- son or corporation to its consumers. This account may, if desired, be further classified 54 under the following headings, which shall be the titles of sub-accounts set up hereunder: (a) Water Purchased (b) Reservation and Drainage Area. (c) Impounding Dams and Reservoirs. (d) Lake and River Cribs. (e) Springs and Wells. (f) Infiltration Galleries and Tunnels. (g) Collecting Conduits and Reservoirs, (h) Gravity Intakes and Suction Mains, (i) Aqueducts and Supply Mains. 402. PURIFICATION SYSTEM EXPENSES. Charge to this account all expenses or costs inci- dent to the purification of water. These expenses include the wages of men employed at the purifica- tion works, their personal and incidental expenses, the expenses of running the works, including the cost of chemicals and supplies, labor for cleaning basins and works, removing ice, scraping and cleaning pu- rification apparatus, heating, lighting, etc. This account may, if desired, be further classified under the following headings, which shall be the titles of sub-accounts set up hereunder: (a) Sedimentation and Coagulation. (b) Softening and Iron Removal. (c) Filtration. (d) Chemical Treatment. (e) Clear Water Basins. 403. PUMPING SYSTEM EXPENSES. Charge to the appropriate sub-accounts hereunder the expenses of pumping water and of running that part of the water works system which is included in accounts Nos. 121-126. These expenses include the salaries and wages, personal expenses of pump- ing station employees, fuel, water power, electric power, electric lighting, gas for power and lighting, janitor service, oil, waste, supplies, etc. a. Operating labor. This includes the pay and expenses of the superintendent of the pumping plant, foremen and all laborers employed in oper- 55 ating the pumping station equipment. This includes such labor as that of chief engineer and assistants, engineers, oilers, wipers, and all other employees whose duties concern the operation of the pumping equipment. Also charge to this account the sal- aries of the engineering staff assignable to the pumping system. Exclude from this account all maintenance labor, which is elsewhere provided for. b. Fuel. This includes the cost of fuel, whether coal or oil, used under the boilers for the generation of steam, and the cost of fuel used for generating producer gas. Such cost should include all speci- fically assignable transportation charges incurred in obtaining the delivery of the fuel on the premises of the purchaser. c. Power Purchased. This includes the cost of all steam, electric current, or water power pur- chased for the purpose of operating the pumping equipment. d. Miscellaneous Supplies and Expenses. This includes the cost of all supplies and expenses in- curred in operating the pumping plant not provided for in the three preceding sub-accounts, such as water used in boilers, oil and waste, etc. 404. DISTRIBUTION EXPENSES. Charge to this account the cost of inspecting, guarding and caring for the transmission mains and accessories, storage reservoirs, tanks and standpipes, the cost of inspecting, testing and caring for the dis- tribution mains and accessories, service pipes, meters, etc., and all other expenses in connection with the transmission and distribution of water, except the cost of repairs. This account may, if desired, be further classified under the following headings, which shall be the titles of the special accounts set up hereunder: (a) Transmission Mains and Accessories. (b) Storage Reservoirs, Tanks and Standpipes. (c) Distribution Mains and Accessories. (d) Service Pipes and Stops. 56 (e) Meters, Meter Boxes and Vaults. (f) Fire Hydrants and Cisterns. (g) Fountains, Troughs and Other Equipment. II. MAINTENANCE EXPENSES. 405. REPAIRS OF WATER COLLECTING SYSTEM. Charge to this account the cost of all labor em- ployed and materials consumed in making repairs to the water collecting system. This includes repairs to lake and river cribs, springs and wells, including the removal of sand and corroded material and re- pairs to well casings, repairs to filter galleries, etc.; repairs to impounding dams and reservoirs, collect- ing aqueducts, intakes and supply mains. This in- cludes the periodical scraping to remove organic growth and incrustation, repairs to masonry of aque- ducts and channels, seeking and repairing leaks, re- pairing piping and replacing worn sections and fit- tings, calking, protecting exposed parts of under- mined supply mains, changing the position of or re- placing such mains with the necessary bracing or digging; repaving and repairs to valves, screens and wet wells; repairs and renewals of grating, fish screens and repairs to submerged and exposed cribs, intake towers and other structures, sluice gates, etc. 406. REPAIRS OF PURIFICATION SYSTEM. Charge to this account the cost of all labor em- ployed and materials consumed in making repairs to the purification system. This includes repairs to settling basins, renewing and washing sand, and repairs to all equipment used in the purification of water by plain sedimentation, sedimentation with coagulation, treatment for softening and removal of iron, algae, .etc., purification by slow and rapid sand filtration, repairs to mechanical filters, etc. 407. REPAIRS OF PUMPING SYSTEM. Charge to this account the cost of all labor em- ployed and materials consumed in making repairs to the pumping system. This includes repairs to all build- ings, fixtures and apparatus used in connection with 57 the pumping of water, such as furnaces, boilers, engines, pumps, etc., and all appurtenant equipment and appliances. This account may, if desired, be divided into sub-accounts corresponding with accounts Nos. 121-126. 408. REPAIRS OF DISTRIBUTION SYSTEM. Charge to this account all matters provided for under the following heads, which may, if desired, be carried as sub-accounts hereunder. (a) Repairs of Transmission Mains and Ac- cessories. — This includes the cost of repairing, overhauling, changing position of or replacing transmission mains and accessories. It also covers such items as seeking and repairing leaks, repairing pipes and removing and replacing worn sections and fittings, calking, protecting exposed parts of undermined mains, digging and bracing in connec- tion with such work, repaving and repairing man- holes, etc., together with all materials and supplies consumed in thawing pipes and scraping to remove incrustations. (b) Repairs of Storage Reservoirs, Tanks and Standpipes. — This includes repairs to masonry and linings due to settlement of underlying material, frost action, or from other causes; calking and re- pairing with cement grouting, asphalt or other waterproof material; painting and calking stand- pipes and tanks, replacing parts on account of de- cay or excessive corrosion or electrolysis, and re- placement of hoops, repairs to valves, etc. (c) Repairs of Distribution Mains and Acces- sories. — This includes the cost of repairing, over- hauling, changing position of or replacing distribu- tion mains and accessories- It also covers such items as seeking and repairing leaks, repairing pipes or removing and replacing worn sections and fittings, calking, protecting exposed parts of un- dermined mains, digging and bracing in connection with such work, repaving, repairing manholes, and the cost of steam, electricity and other supplies 58 used and expenses incurred in thawing such mains and removing incrustations. (d) Repairs of Service Pipes and Stops. — This includes the cost of repairing, overhauling and changing position of water service connections, in- cluding such expenses as seeking and repairing leaks, cleaning and scraping out service pipes; re- pairing and renewing service pipe connections to meters, including stop cocks, service boxes and the cost of repairing the same. Also include here- under the cost of changing and extending old ser- vice pipes to put meter in better location, and the expense for materials and supplies incurred in thawing services. (e) Repairs of Meters, Meter Boxes and Vaults. — This includes readjusting, painting, re- placing worn gears, wearing parts and dials, test- ing and repairing old meters, repairing and replac- ing connections, meter fittings, etc., meter unions and cocks and changing meters for routine tests, etc. (f) Repairs of Fire Hydrants and Cisterns. — This includes repairs and renewals of parts, includ- ing digging and filling in connection with such re- pairs, painting hydrants, replacing worn fittings, protecting exposed parts of undermined hydrants and connections, and changing location of hy- drants; repairs of masonry and lining of fire cis- terns due to settlement of underlying material, frost action or from other causes, calking and repairing with cement grouting, asphalt or other waterproof material, replacing worn parts due to decay or other causes and repairs and renewals of connecting piping and fittings. (g) Repairs of Fountains, Troughs and Other Equipment.- — This includes the cost of repairs and renewals of parts, painting, repairing foundations and settings, connections, etc. ; overhauling and changing position of fountains, troughs, and other equipment of the distribution system not above pro- vided for. 59 409. GENERAL REPAIRS. Charge ta this acocunt the cost of all labor em- ploytd and materials consumed in making repairs to general structures and general equipment, such as general offices, general storehouses, general stable buildings, shops, etc., and all equipment connected therewith (for details of which see account No. 135). 410. GENERAL AMORTIZATION. Charge to this account monthly or quarterly the amount estimated to be necessary to cover such wear and tear and obsolescence and inadequacy as have accrued during the period in the tangible fixed cap- ital of the corporation or municipality devoted to water service operations, such portion of the life of intangible fixed capital as has expired or been con- sumed during the period, and the amount estimated to be necessary to provide a reserve to cover the cost of property destroyed by extraordinary casualties; less the amounts charged during the period to the above repair accounts. The amount charged to this account should be concurrently credited to the re- serve account "Accrued Amortization of Capital." Note. — Until otherwise prescribed, the "amount esti- mated to be necessary to cover such wear and tear and obsolescence and inadequacy as have accrued during" any month shall be based on a rule to be determined by the accounting corporation. Such rule may be derived from consideration of the said corporation's history and expe- rience. A general statement of the rule in use by each company, together with the general information upon which it is based, is to be filed with the Board of Public Utility Commissioners. ni. GENERAL AND MISCELLANEOUS EX- PENSES. 411. ADMINISTRATION EXPENSES. Charge to this account all matters provided for un- der the following heads: (a) Salaries and Expenses of General Officers. — This head includes the salaries, traveling and incidental expenses of all general officers, such as president, vice-president, treasurer, Secretary, comptroller, general auditor, general manager, assistant general manager, chief engin- 60 eer, general superintendent, and all other officers whose jurisdiction extends to. the entire system and whose services cannot be satisfactorily allo- cated to the several departments. (b) Salaries and Expenses of General Office Clerks. — This head includes the salaries and ex- penses of all clerks and assistants connected with the general office, except such as may be directly engaged in other departments, in which case their compensation should be charged to such depart- ment directly. (c) General Office Supplies and Expenses. — This head includes the cost of all general office supplies, such as general administrative stationery, printing, postage, etc., wages of janitors, porters, and messengers; rent of rooms in office buildings and all other miscellaneous expenses of general of- fices. 412. ACCOUNTING AND COMMERCIAL EX- PENSES. Charge to this account all matters provided for under the following heads: a. Salaries and Expenses of Accounting and Commercial Employees. — This head includes the salaries and expenses of meter readers, employees engaged in delivering bills for water, bookkeepers and all clerks having to do with consumers' ac- counts. b. Accounting and Commercial Office Sup- plies and Expenses. — This head includes the cost of all office supplies in the commercial department, such as stationery, printing, postage, etc., rent of office rooms, and all other incidental expenses of the commercial office. Note. — In the case of small companies, where the commercial and general offices are combined in one and there are no regular employees who devote all their time to commercial work, account No. 412 may be con- solidated with account No. 411, and all office expenses included under one head, and the cost of meter read- ing and delivering bills when done by employees of the distribution department included under account No. 404, "Distribution Expenses." 61 413. BUSINESS PROMOTION EXPENSES. Charge to this account all expenses incurred for the purpose of promoting and extending the water service business of the accounting person or corpora- tion. This includes advertising, canvassing and soli- citing, demonstrations, etc., and all expenses connect- ed therewith. 414. LEGAL EXPENSES. Charge to this account all law expenses except those incurred in the defense and settlement of dam- age claims. This includes salaries and expenses of all counsel, solicitors and attorneys, their clerks and attendants, and expenses of their offices; cost of law books, printing briefs, legal forms, testimony, and payments of special, notarial, and witness fees not provided for elsewhere; expenses connected with taking depositions, and all law and court expenses not provided for elsewhere. Note. — The compensation of the general solicitor or counsel or other attorneys engaged partly in the defense or settlement of damage suits and partly in other legal work, should be properly apportioned between this account and account No. 415, "Injuries and Damages." 415. INJURIES AND DAMAGES. Charge to this account all expenses on account of persons killed or injured and property damaged (other than that owned by the company or municipal- ity) in connection with the operation of the water works. This includes judgments for damages and plaintiff's court costs; salaries, fees, and expenses of surgeons, and doctors; nursing, hospital attendance, medical and surgical supplies; fees and expenses of coroners and undertakers; annual contributions to hospitals; transportation of injured persons; and wages and salaries paid to employees while disabled. Also charge to this account the salaries and ex- penses of the company's claim agents, adjusters, and their assistants ; the compensation of the gen- eral solicitor or counsel and other attorneys while engaged in the defense and settlement of damage suits, and all other legal expenses incurred on ac- count of injuries and damages. 62 Note. — If it is desired that the charge to operating expenses on account of injuries and damages shall be upon some arbitrary basis, the amount so charged should be credited to account No. 219, "Casualty and Insurance Reserve," and the actual disbursements above enumerated should be charged against such reserve account. 416. INSURANCE. Charge to this account premiums paid to insur- ance companies for fire, casualty, boiler, fidelity, bur- glar and all other insurance; also amounts set aside as an insurance reserve. 417. RELIEF DEPARTMENT AND PENSIONS. Charge to this account all salaries and expenses in- curred in connection with conducting a relief depart- ment; contributions made to such department; pen- sions paid to retired employees and all expenses in connection therewith. 418. WATER FRANCHISE REQUIREMENTS. This account includes the cost of water and other materials and supplies furnished to municipal cor- porations in compliance with franchise requirements, for which no payment is received; also the direct expense of paving, etc., incurred in compliance with such requirements, for which no reimbursement is received. Amounts charged to this account for which there is no direct money outlay should be credited to "Duplicate Water Charges — Cr.," under account 420, "Miscellaneous Adjustments — Balance." 419. STORE AND STABLE EXPENSES. Charge to this account all matters provided for un- der the following sub-accounts : a. Store Expenses: This account includes all salaries and expenses in connection with store rooms, including cost of sending materials and sup- plies from general storerooms to branch store- rooms, and the collection of scrap material. b. Stable Expenses: This account includes the cost of feed, keep, and shoeing of horses, wages of stablemen and hostlers, veterinary expenses, and all other expenses of stabling horses; also the 63 cost of repairing harness and vehicles. Also in- clude under this head all automobile and garage expenses. Note. — Account No. 419 may, if desired, be carried as a clearing account, and closed out at the end of each month or other fiscal period into the appropriate depart- mental operating expense accounts. 420. MISCELLANEOUS ADJUSTMENTS — BAL- ANCE. This account includes: a. Inventory Adjustments — Balance: At least once a year an inventory of materials and supplies should be taken, and the difference (with respect to any particular class of materials and supplies) between the ledger and inventory balances debited or credited to this account under this head in case it can not be assigned to a specific account. Note. — Where materials and supplies have been used in construction as well as in operation, a suitable proportion of the shortages or overages disclosed by the inventory may be debited or credited to "Miscellaneous Construction Ex- penditures." b. Discounts on Materials and Supplies. — Cr. : Credit to this account under this head all discounts received through the prompt payment of bills for materials and supplies consumed in operation, un- less such discounts are applied to the particular bills. c. Duplicate Water Charges — Cr. : Credit to this account under this head all charges made to any accounts in water operating expenses for any water or other product of water operations of the corpora- tion consumed in such operations. d. Water Expenses Transferred — Cr. : Credit to this account under this head the proportion of oper- ating expenses, including depreciation and other amortization as well as repairs, chargeable to other coordinate departments (such as electric or street railroad) within the same corporation, but de- frayed in the first instance by the water department. Note. — This account should not be credited with any allowance in the nature of rent or return upon the cost or value of property. 64 e. Joint Operating Expense. — Cr. : When any plant or equipment is maintained or operated by the accounting corporation for tlie joint benefit of itself and others under an arrangement for appor- tioning (on the basis of the relative amounts of benefit to the several participants) the operating expenses, the portion of such expenses chargeable to others under the arrangement should be credited to this account under this head. The portion so credited should not include any allov^rance for profit or return upon the value of such property. 421. MISCELLANEOUS GENERAL EXPENSES. Charge to this account all miscellaneous general ex- penses not elsewhere provided for and which are of such unimportant character as not to warrant the opening of separate accounts therefor. 422. TAXES. An acount should be kept of the taxes chargeable against each particular class of operations, and one for those chargeable against non-operating revenues. Each tax account should be appropriately entitled (as e. g., "Taxes Assignable to Water Operations," "Taxes Assignable to Non-Operating Revenues," etc.), and shall be so kept as to show separately the following: State Franchise Tax on Capital Stock. State Franchise Tax on Gross Earnings. Special Franchise Tax. Taxes on Real Estate. Taxes on Personal Property. Other Taxes (showing in detail). To each tax account there should be charged monthly or quarterly the amount of taxes accruing during the period and such amount should be con- currently credited to the account "Taxes Accrued" (or to the account "Prepaid Taxes," if such tax is prepaid). The amount of taxes accruing during any month or quarter should, where the levy is unknown, be estimated as nearly as may be, and when the levy is ascertained the matter should be adjusted during 65 the remainder of the tax year. For example, if al the beginning of a tax year the taxes on a particular class of property are estimated to be $600 for the year, the monthly charge on account of such tax should be $50 until the amount of levy becomes known. If during, say, the fifth month, it is found that the levy for the year is $640, there will already have been charged up four months at $50 per month, leaving $440 to be charged during the remainder of the year, or $55 for the fifth month and each month during the remainder of the year. Such taxes as pertain to two or more classes of operations or to non-operating revenues should be apportioned with regard to such operations and non- operating revenues upon an equitable basis, which basis will be required to be reported in the annual report of the corporation to the Board of Public Utility Commissioners. 423. UNCOLLECTIBLE WATER BILLS. When any bill rendered for the sale of water or other product of water operations or for services performed in connection therewith, has proved, af- ter reasonably diligent effort, impracticable of col- lection, the amount should be charged to this ac- count and credited to the account receivable in which it has therefore been carried. Note. — If it is desired that the charge to operating ex- penses on account of uncollectible bills be upon some arbi- trary basis, the amount so charged should be credited to a reserve account against which should be charged the actual amount of bills which prove to be uncollectible.