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16, Deductions. — In cases where the company maintains
a relief association for the benefit of employes to which they
are required to contribute, the amount of such contribution
is usually deducted from the amount of wages due the employe
and is entered on the pay roll in a column provided for that
purpose and the net amotmt of wages due the employe is then
entered in the next colunMi. Other deductions are sometimes
made on the pay rolls from the amount due employes, as, for
instance, for the rent of company houses, etc.

When all entries have been made and the amounts verified
and totalled, the pay rolls are usually written with a tjrpewriter
in triplicate, then signed by the ofiicers of the division, and
forwarded to the auditor.

17. Pay-RoU Reports. — ^A pay-roll report, or pay-roll
summary, is necessary to show the distribution of the amounts
to the primary expense accounts. ' This report is made by the
timekeeper, as he is the only one who has the necessary informa-
tion. The report has a coltimn for each primary operating
transportation expense accoimt, and a coltimn is also provided
for individuals and companies, so that amounts to be paid by
some other individual or company are not entered in any of
the operating expense columns but are entered in this column.



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12 ACCOUNTS FOR STEAM ROADS § 35

Thus, if the C. D. R. R. is to pay part of the expense of tele-
graph operators between certain points on the A. B. R. R.
for use of the tracks, the A. B. R. R. will make its pay rolls
show the ftdl amount of wages due those operators but will
charge its accoimt with only the portion of the wages it is to
pay; the portion the C. D. R. R. is to pay will be entered in the
column headed Individuals and Companies, and a bill will be
made against the C. D. R. R. for the amoimt.

If the first pay-roll sheet shows the names of only the super-
intendent and his assistants and clerks, the total of the sheet
will be entered in the column provided for the total and also in
the coltmm headed Superintendence. If the second pay-roll
sheet has the names of only the train despatchers and opera-
tors, the total will be entered in the total column and also in
the column headed Despatching Trains, which is the primary
operating expense accoimt to which such wages should be
charged. When a pay-roll sheet has entries chargeable to
different accoimts, such amoimts must be segregated and each
separate amount entered in the proper column in accordance
with the classification of operating expenses.

18. Division Cliarges. — In many cases, the pay rolls of a
large railroad made by the division superintendent will include
the wages paid to employes on a subdivision and which must be
separated from the payments and charges of the main division.
This is provided for by entering the segregated amounts in the
proper space at the bottom of the summary sheet.

The pay-roll report is made immediately after the pay rolls
are finished and is forwarded to the auditor.

19. Auditing of Pay Bolls. — ^As soon as the pay rolls
are received in the auditor's office, the entries are verified as
to the correctness of all computations and totals. If errors
are fotmd, the officer in whose department the pay roll was
made is immediately notified and requested to give correct
information. When the pay rolls are approved and a check
written for each employe shown on the rolls, the checks are
verified with the amounts on the rolls and proved with a total,
so that there will be no possibiUty of any error in the amount



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§35 ACCOUNTS FOR STEAM ROADS 13

paid out by the checks. . After this has been done the checks
and the original of the pay rolls are returned to the superin-
tendent, and the paymaster pays the employes.

20. Accounting. — ^The amoimts charged to the primary
operating expense accounts in the superintendent's ofl&ce,
are used in the auditor's office in making a summary for the
entire road, but they do not enter the accotmt in the general
ledger.

The principle of the voucher system again enters into the
work. The check may* be considered as part of the voucher
although it is separate. The accotmts entered in the general
ledger are the general accounts showing the classification as
transpcMtation expenses, traffic expenses, etc.

A voucher will be made by the auditor for the purpose of
making the journal entry, which will be made only for the total
amount of the pay rolls of the transportation department, and
the amotmt will be debited to the account of transportation
expenses in the general ledger, except- that the amount charge-
able to iadividuals and companies will be charged to that
accoimt.

21. It can be readily understood that inasmuch as the pay-
ment of the wages shown on the pay rolls is made by a check
and not in actual cash that the cash account cannot be credited
with these amounts imtil the cash has been paid out; therefore,
when the amotmts are debited to the transportation expense
accotmt in the general ledger, they must be credited to a tempo-
rary account, which becomes a suspense, or clearing, account.
As soon as the banks pay the checks, the treasurer's cash accotmt
is affected and the total of the checks paid must be credited to
the treasurer's cash accoimt in the general ledger and debited to
the temporary or suspense accoimt which had been previously
credited. This temporary account will therefore be cleared
as soon as all the pay-roll checks have been paid from the
treastu'er's cash. Any unpaid wages must be credited to and
remain in an open account as a Uability until finally paid or
credited to the prpfit-and-loss account.

I L T 234—12



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14 ACCOUNTS FOR STEAM ROADS § 35

A journal entry as shown in Fig, 3 will then be made from
the auditor's voucher.

The procediu'e is the same for the pay rolls of the different
departments of a railroad. The total of the amoimts charged

Transportation expenses $50,000

Individuals and companies 5,000

Wages due $55,000

Entry made to charge various accounts and credit wages due account
with the amount of pay-roll checks of transportation department
for month of

Pig. 3

to the general expense accounts in the general ledger will form
the total of the operating expenses, which is carried to the
income accoimt and deducted from the operating revenue,
resulting in the net revenue.



STUDY OF CLASSIFICATION

22. There is sent with this Instruction Paper a copy of the
Classification of Operating Revenues and Operating Expenses of
Steam Roads, effective on July 1, 1914. This Classification is
furnished in the original form so that the student may become
familiar with the actual pamphlets used in railroad work. This
pamphlet should be carefully studied in connection with this
Instruction Paper. The questions that follow are based on the
information contained in the Classification pamphlet.



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ACCOUNTS FOR STEAM ROADS

(PART 3)



INCOME, PROFIT- AND-LOSS, AND GENERAL
BALANCE-SHEET ACCOUNTS

1. On Jtdy 1, 1914, a new Classification of Income, Profit-
and-Loss, and General Balance-Sheet Accounts for Steam
Roads was made effective by the Interstate Commerce Com-
mission.'* This classification is introduced by the ifollowing
letter:

To Accounting Officers of Steam Railways:

This Classification of Income, Profit-and-Loss, and General Balance-
Sheet Accounts supersedes the Form of Income and Profit and Loss State-
ment for Steam Roads, first issue, effective July 1, 1912, and the Form of
General Balance-Sheet Statement, first revised issue, effective June 15,
1910. It also supersedes conflicting instructions in Accounting Bulletin
No. 8.

In Income, all of the revenues for operating physical property, the
cost of which is includible in the accounts for investment in road and equip-
ment, have been combined in one account, and correspondingly the expenses
of operation have been combined. Separate accounts have been provided
for the revenues from and the expenses of operating miscellaneous physical
property. A distinct account has been provided in which to include such
revenue from operations as has been determined to be uncollectible
during the period for which the accounts are stated. Distinct accounts
have been provided for rent from and rent for the several classes of
equipment.

In Profit and Loss, an account has been provided in which to show the
amount of revenue overcharges which are determined to be unrefundable
during the period for which the accounts are stated. An account is also

COPYRiaHTKD BY INTKRNATIONAI. TKXTkOOK COMPANY. ALL RiaHTS RBSBRVBO

§36



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2 ACCOUNTS FOR STEAM ROADS ' § 36

provided for donations from individuals and companies for the construc-
tion 9r acquisition of property or for compensating the carrier for loss
anticipated during the early period of operation.

Balance-sheet asset accounts have been provided for improvements on
leased railways property; and deposits in lieu of mortgaged property sold.
Additional accounts have been provided ^in which to include demand
deposits and time drafts and deposits, items which heretofore have been
included as cash. The account Taxes Paid in Advance has been eliminated
and provision made for showing in red the net amount of taxes paid over
the amou36 ACCOUNTS FOR STEAM ROADS 11

Held by or for carrier at date, in short column
Actually outstanding at date, in long column
752. Stock liability for conversion
763. Premium on capital stock
' Total

Governmental Grants

754. Grants in aid of construction

Long Term Grant

755. Funded debt unmatiu^

Book liability at date, in short column

Held by or for carrier at date, in short column

Actually outstanding at date, in long column

756. Receiver's certificates

757. Non-negotiable debt to affiliated companies

Notes*

Open accounts

Total

Current LiABiLiTms

758. Loans and bills payable

759. Traffic and car-service balances payable

760. Audited accounts and wages payable
76L Miscellaneous accounts payable

762. Interest matured unpaid

763. Dividends matured impaid

764. Funded debt matured unpaid

765. Unmatured dividends declared

766. Unmatured interest accrued

767. Unmatured rents accrued

768. Other current liabilities
Total

Deferred Liabilities

769. Liability for provident funds

770. Other deferred liabilities
Total

Unadjusted Credits

771. Tax liability

772. Premium on funded debt

773. Insurance and casualty reserves

774. Operating reserves

775. Accrued depreciation, road

776. Accrued depreciation, equipment

777. Accrued depreciation, miscellaneous physical property

778. Other unadjusted credits
Total



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12 ACCOUNTS FOR STEAM ROADS . § 36

Corporate Surplus

779. Ad4itions to property through income and surplus

780. Funded debt retired through income and surplus

781. Sinking fund reserves

782. Miscellaneous fimd reserves

783. Appropriated surplus not specifically invested
Total appropriated surplus

784. Profit and loss, balance
Total corporate surplus

11. Special Instructions. — ^The method of handling dis-
count and pranium on capital stock is prescribed by the Com-
mission in special instructions as follows:

Discount and Premium on Capital Stock. — ^Ledger accounts shall be
provided to cover the discounts and premiiuns at the sale or resale of each
subclass of capital stock issued or assumed by the company. The total
of the net debit balances remaining in these several accounts shall be
included in Account No. 724, Discount on Capital Stock, and the total
of the net credit balances in Account No. 753, Premiiun on Capital Stock.
For explanation of subclass see Account No. 751, Capital Stock.

By the term discount is meant the excess of the par value of stocks
actually issued or assumed over the actual money value of the consideration
received for such stocks. By the term premium is meant the excess of the
actual money value of the consideration received for stock actually issued or
assumed over the par value of such stock.

The term premium is not intended to include amounts received repre-
senting expected dividends considered to have accrued since the last
dividend period in case of stocks on which dividends are regularly paid,
nor is discount, as above defined, intended to be diminished by any such
amount represbnting expected dividends explicitly stated in the price at
which the stock is issued.

Entries in these accounts representing discoimts shall be carried therein
until offset (1) by premiiuns realized on subsequent sales of the same
subclass of stock, (2) by assessments levied on the stockholders, (3) by
appropriations of income or surplus, for that purpose, or (4) by charges to
profit and loss upon reacquirement of the stock. Entries in these accounts
representing premiiuns realized shall be carried therein until offs^ (1) by
discounts suffered on sales of the same subclass of stock, or (2) by credits
to profit and loss upon reacquirement of the stock.

In case the accounting company is permitted and elects to distribute
all or any part of the net premium on its capital stock to its stockholders,
the amount thus distributed shall be charged to the premium account.

For the purpose of this Classification, the premium realized at the sale
of capital stock shall not be considered a profit-and-loss item, except upon
the reacquirement of the stock sold.



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§ 36 ACCOUNTS FOR STEAM ROADS 13

In no case shall discount on capital stock be charged to or included in
any account as a part of the cost of acquiring any property, tangible or
intangible, or as a part of the cost of operation.

When stock which has been issued or assumed by the accounting com-
pany is reacquired, the difference between the price paid and the par value
of the stock shall be credited to Profit-and-Loss Account No. 607, Miscel-
laneous Credits, or charged to Account No. 621, Miscellanet)us Debits,
as may be appropHate. Concurrently the premium or discount account
for the particular issue of stock reacquired shall be adjusted through
profit and loss to the extent of the premiimi or discount applicable to the
shares reacquired. In case the premiimi realized or discount suffered at
the prior sale of the stock reacquired has been included in an asset account
other than the premiums and discounts account, such asset account shall
be concurrently adjusted through profit and loss to the extent of the
premitun or discount previously included therein with respect to the shares
reacquired.

STUDY OF CLASSIFICATION

12. Accompanying this Instruction Paper is sent a copy
of the Classification of Income, Profit-and-Loss, and General
Balance-Sheet Accounts of Steam Roads, as issued by the
Interstate Commerce Commission. This pamphlet should be
studied as a part of this Instruction Paper not only because
the following Examination Questions are based on it, but also
because a knowledge of its contents will prove especially valuable
in understanding the financial statements issued by railroads.



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ACCOUNTS FOR MINING
COMPANIES



ACCOUNTING METHODS



INTRODUCTION

1. The prominence given to the mining industry by the
different nations of the world is shown by the estabUshment
of special government departments for its control. Yet the
requirements for the organization of mining corporations are
neither special nor unusual.

A mining company is organized in the same manner as a
manufacturing, or trading corporation, and usually under the
same general laws, although there are practices in connection
with their organization that do not, as a rule, obtain in the
establishment of manufacturing companies.

The operations of digging, hoisting, and preparing coal or
ore for shipment is analogous to the manufacturing of articles
for sale to the trade. Once produced and ready for shipment,
the sale and delivery resolves itself into a matter of salesman-
ship, as in any trading concern.

2. A mining company either owns the mines or leases them
for a term of years on a royalty basis of so much per ton of coal
mined. The company that operates its own mines may open
an account for each mine, to which is charged all outlay for
development, necessary construction, improvements, operating
charges, expenses, etc. Income from sales, less all operating
and general charges shows the net earnings of the mine for any

COPYRI6HTEO BY INTERNATIONAL TEXTBOOK COMPANY ALL RIOHTS RKSKRVKD

§37

I L T 234—13



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2 ACCOUNTS FOR MINING COMPANIES § 37

fiscal period. In case the mine is leased to another company,
the bookkeeping is reduced to the entry of royalties received
and of depreciations and other expenses incurred.

3. As the head office is usually located in some city, the
superintendent, or his clerks, must carefully record full details
pertaining to operations, coal mined, broken, stocked, and
shipped, labor charges, pay roll, accidents, etc., and then send
these to the head office in the form of detailed reports. From
these reports, entries are made in the proper accotmts.

The miner is paid either by the ton or by the carload of coal
mined. From the amoimt thus due him, however, deductions
are made for helpers, if any, supplies furnished, as powder and
tools, rent of house, store charges, and probably for benefit or
relief fund. The balance due is paid by the manager in cash
or by check sent from the head office. Care must therefore be
exercised in keeping track of supplies, stores, etc. charged to
each miner's account and to report these charges to the head
office. The sales are usually made from the head office, though
shipments are sent direct from the mine according to directions
supplied.

BOOKS AND ACCOUNTS

4. In the conduct of a mining company there are numerous
forms and records in use; n^ny of these, however, are statistical
and have little or no bearing upon the account-keeping system.
A great n^ny of these records are required by national and
state laws and regulations, and nimierous reports pertaining
to labor, men employed, accidents, deaths, sickness, output
of ore, etc. are made to the state in which the mines are located,
also to the Department of Mines in Washington.

6. The income from a mine must be derived ahnost entirely
from its output of coal or ore, and to some extent from its
by-products; but the cost of operating the mine must be sepa-
rated into several divisions. There is the expense at the head
office, the original cost of the mine, the cost of outside equip-
ment, tte cost of development and opening the mine, the inside



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§ 37 ACCOUNTS FOR MINING COMPANIES 3

construction, the mine equipment, cost of mining the ore, cost
of bringing it to the surface, cost of milling or breaking, the
selling expense, the cost of transportation, etc.

If all the accounts are kept at the mine, only the main
accounts need be kept at the head office, with suitable controlling
accoimts for the various mine properties and mine activities.
Data for entry therein will be obtained from the reports received
from the mine superintendent at regular periods. If the books
are kept at the head office, then only such records need be kept
at the mines as are necessary for providing detailed information
for daily reports.

In any case there is required a general ledger, customers'
ledger, creditors' ledger, or voucher record, cash book, sales
book, journal, labor records, record of sales from company
stores, record of mine and milling expenses, etc. Of course,
there is considerable variance in the books and accounts kept
by mining companies and in the manner of recording data,
consequently no one system can be outlined that will meet the
needs of all.

6. Accounts of a Coal-Mining Comjiany. — Following
is shown a partial schedule of accounts used by a large Com-
pany engaged in the mining and selling of soft coal and in the
manufacture of coke. First, there are given the forty-one gen-
eral ledger accounts; this list shows the large variety of the
items that must be accounted for. The present list is divided
into two parts. The first part (a) shows the operating expense
accoimts at the mine and their subdivisions. The second
part (6) shows the operating expense accounts at the coke plant
and their subdivisions.

General Ledger Accounts



1.


Cost of property


9.


Boarding-house fixtures


2.


Lands


10.


Saloon buildings


3.


Mine development


n.


Machinery for prospecting


4.


Tramways, chutes, and trestles


12.


Earnings


5.


Buildings


13.


Mine expense (controlling ac-


6.


Power and machinery




count)


7.


Cars and tracks


14.


Coke expense (controlling ac-


8.


Coke ovens




count)



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ACCOUNTS FOR MINING COMPANIES § 37



15.

16.
17.
18.
19.
20.
21.
22.
23.

24.

25.
26.
27.



1.



General expense (frequently
subdivided)

Boarding-house expenses

Boarding-house receipts

Rents

Insurance

Taxes

Personal-injury claims

Coal prospecting

Depreciation of general plant,
etc.

Interest, discount, and ex-
change

Vouchers

Pay rolls

Treasurer (or cash account)



28. Unclaimed wages

29. Depreciation reserve account

30. Material and supplies

31. Engineering property

32. Pay-roll deficiency

33. Personal injury fund

34. Animals killed and sold

35. Special renewal fund

36. Individuals and companies (ac-

coimts receivable)

37. Water supply

38. Smithing

39. Sawmill

40. Depreciation of animals

41. Profit and loss



Mine-Operating Accounts



Expense of mining

Hand mining

Contract machine mining

Day-work machine mining

Drilling, shooting, and load-
ing

Loading company coal

Ladders and tool boxes

Running man trip

Sharpening tools

Powder man

Check man

Wire man

Shot inspectors

Earth tamping

Tamping and powder
boxes

Interpreter
Hauling

Proportion power-house ex-
pense

Drivers

Outside hoistmen

Underground hoistmen

Locomotive men

Rope runners

Couplers and spraggers

Roller men and greasers



Proportion stable expense
Harness repairs and shoeing
Clearing up wrecks
Repairs haulage signals
Cleaning haulage tracks
Roller repairs and renewals
Repairing haulage entries
3. Loading

Outside foreman's salary
Weighman and topmen
Pushers and dumpers
Couplers and spraggers
Proportion power-house ex-
pense
Rtmning chute engine
Loading by day labor
Loading by contract
Running and repairing box

loader
Car handlers
Attendance elevators,

screens, etc.
Cost dummy doors
Unloading dust and yard

waste
Cleaning yard tracks
Damage to railroad cars and
tracks



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§37 ACCOUNTS FOR MINING COMPANIES



4. Repairs to cars

Repairing wrecked cars
Repairing worn-out cars
Replacing lost cars

6. Repairs to tracks

Hoist and locomotive tracks
Ordinary entry and room

tracks
Taking up old rails and ties

6. Electric light

Proportion power-house ex-

I)ense
Repairs interior wiring

7. Entry driving

Yardage in straight coal
Yardage in coal and rock
Yardage in straight rock
Allowance for boney coal or

rock
Allowance for rolls
. Allowance for water

8. Rooms and roUs

Rooms turned

Allowance for roUs in rooms
Allowance for brushing roof
Allowance for boney coal or

rock
Allowance for water

9. Ventilation

Proportion power-house ex-
pense

Gas and air inspectors

Fan expenses and engineer

Building and repairing stop-
pings

Brattice cloth and bratticing

Building and repairing mine
doors

Trappers

Qeaning air ways

Repairing air ways
10. Drainage and watering mine

Proportion power-house ex-
pense

Outside pumps and pump-
men



Inside pumps and pumpmen
Water men and supplies
Ditches and simips

11. Timber and props

Driving entries and rooms
Retimbering and robbing

rooms
Repairing haulage entries
Repairing air and traveling

ways
Unloading and piling
Hauling and sawing
Loading and ddivering
Drawing props

12.1 Dead work

Retimbering rooms
Regrading and brushing en-
tries
Prospecting faults
Loading and hauling rock
Dtunping and stowing rock
Underground inspection
Repairing company tools
Cleaning camp

13. Repairs to buildings and chutes

Main chute and trestle
Crusher elevator and screen

building
Power and boiler house
Boarding houses
Bam and corral buildings
Boarding houses
Blacksmith and machine

shops
Other mine buildings



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