lines; and all other revenues in connection with the operation of public
NOTE A. No credit should be made to this account for passage or services
furnished the rail department or other outside operations, but the cost of this
service should be credited to Operating Expenses, Account No. IV, " Other
NOTE B. When passage and other services are furnished to the carrier's
employees at reduced rates, only the actual amount received shall be credited to
334 RAILROAD EXPENSES
II. RUNNING EXPENSES.
III. GENERAL EXPENSES.
IV. OTHER OPERATIONS CR.
This account includes a carrier's revenue from conducting an outside
operation not otherwise classified.
NOTE A. No credit should be made to this account for services, material, and
supplies furnished the rail department or other outside operations, but the cost
of the service should be credited to Operating Expenses, Account No. IV,
" Other Operations Cr."
NOTE B. When services, material, and supplies are furnished to the carrier's
employees at reduced rates, only the actual amount received shall be credited to
II. KUNNING EXPENSES.
III. GENERAL EXPENSES.
IV. OTHER OPERATIONS CR.
CLASSIFICATION OF EXPENDITURES FOR
ADDITIONS AND BETTERMENTS
FIRST REVISED ISSUE EFFECTIVE JULY 1, 1910
INTERSTATE COMMERCE COMMISSION,
BUREAU OF STATISTICS AND ACCOUNTS,
Washington, June 1, 1910.
To CARRIERS CONCERNED:
The Classification of Expenditures for Additions and Betterments, First
Issue, was promulgated under date of June 21, 1909.
A study of the questions arising from the application of that classi-
fication, and a consideration of the suggestions submitted by those respon-
sible for its application, have led to the conclusion that it is desirable, at
this time, to issue a revised edition and to grant carriers certain options
which the previous classification did not grant.
A new account, A 22, ' ' Koadway Machinery and Tools, ' ' is provided to
include the cost of such roadway machinery and tools (other than small
hand tools) as may, under the conditions therein imposed, properly be
included in the property accounts. The title of the account ' ' Miscellaneous
Structures," as it appeared in the First Issue, has been changed to " Other
Additions and Betterments, ' ' and the scope of the account has been some-
what enlarged. The General Instructions and the text of several accounts
have been rewritten for the purpose of making clear certain points about
which doubts have been expressed.
The text of the Equipment account now provides that when equip-
ment is practically rebuilt the reserve for accrued depreciation shall be
adjusted and the basis for depreciation on such equipment amended to
meet the changed conditions. In making an estimate of a proper rate to
be applied for depreciation on equipment, it will be necessary to consider
only its probable life in service as prolonged by usual repairs.
GENERAL INSTRUCTIONS 338
A 1. Right of Way and Station Grounds 342
A 2. Real Estate 343
A 3. Widening Cuts and Fills 343
A 4. Protection of . Banks and Drainage 343
A 5. Grade Reductions and Changes of Line 344
A 6. Tunnel Improvements 345
A 7. Bridges, Trestles, and Culverts 345
A 8. Increased Weight of Rail 346
A 9. Improved Frogs and Switches 346
A 10. Track Fastenings and Appurtenances 346
A 11. Ballast 347
A 12. Additional Main Tracks 347
A 13. Sidings and Spur Tracks 347
A 14. Terminal Yards 348
A 15. Fencing Right of Way 348
A 16. Improvement of Crossings Under or Over Grade 349
A 17. Elimination of Grade Crossings 349
A 18. Interlocking Apparatus 350
A 19. Block and Other Signal Apparatus 350
A 20. Telegraph and Telephone Lines 351
A 21. Station Buildings and Fixtures 351
A 22. Roadway Machinery and Tools 351
A 23. Shops, Enginehouses, and Turntables 352
A 24. Shop Machinery and Tools 352
A 25. Water and Fuel Stations 352
A 26. Grain Elevators and Storage Warehouses 353
A 27. Dock and Wharf Property 353
A 28. Electric Light and Power Plants 354
A 29. Electric-Power Transmission 35-1
A 30. Gas-Producing Plants 355
A 31. Snow and Sand Fences and Snowsheds 355
A 32. Reconstruction of Road Purchased 355
A 33. Equipment 356
A 34. Interest and Commissions 357
A 35. Other Additions and Betterments '. 357
338 RAILROAD EXPENSES
1. APPLICATION OF THIS CLASSIFICATION. This classification should be so
applied as to reflect the net increase or decrease (determined according to
the rules provided) in the investment of a carrier in such property as is
used in the operation of railways as transportation agencies, including
outside operations incidental to furnishing transportation. Entries in the
accounts prescribed in this classification should be made only with respect
to additions to, betterments of, and withdrawals and retirements of prop-
erty composing the plant and equipment of existing main and branch lines,
including sidings and spur tracks and the necessary buildings, structures,
and facilities. Until such time as a new railway or any important section
of it, constructed as an extension of existing main or branch lines or as a
new project, has reached such a stage of completion that it is, or may be,
regularly operated for the purposes of a common carrier, expenditures
proper to be included in the accounts representing the cost of road and
equipment should be charged directly to the accounts prescribed in the
Classification of Expenditures for Eoad and Equipment, and not to the
accounts in this classification.
2. INCLUSION OF ALL ADDITIONS, BETTERMENTS, AND DEDUCTIONS.
The accounts herein provided should include the cost of additional land,
buildings, structures, and facilities, not taking the place of any property
of like purpose previously held by the accounting carrier; the cost of newly
acquired equipment; the cost of improving land, buildings, structures,
facilities, and equipment by additions thereto not involving the replace-
ment of the property improved; the excess cost of improved buildings,
structures, or facilities (except land and equipment) over the cost of
replacing in kind structures and facilities of like purpose demolished,
abandoned, or withdrawn from service; and the necessary credits to rep-
resent property abandoned, sold, or otherwise retired from service.
3. EXCLUSION OF DISCOUNTS. When the consideration actually given
for anything, with respect to which a charge is made to any account in
this classification, is anything other than money, the actual consideration
should be described in the entry with sufficient fullness and particularity
to identify it, and the amount charged should be the actual money value
of the consideration at the time of the transaction. No discount on
securities or other commercial paper should be included in the cost of any
property or improvement. Provision is made, however, in account A 34,
" Interest and Commissions," for the inclusion in that account of bon&
fide interest accruing during the period of construction on money bor-
rowed and expended for additions and betterments, but it should not be
construed to cover any interest in excess of that accruing on the amount
necessary for actual additions and betterments, between the time when
the money becomes available and the time when the property acquired or
ADDITIONS AND BETTERMENTS 339
improved is completed or received or available for the service for which it
4. PROPERTY BETIRED AND REPLACED. When property (other than land
or equipment), a betterment of which would be chargeable to the accounts
of this classification, is abandoned, demolished, or otherwise retired from
service for the purpose of or by reason of its replacement by property
of like purpose of a better kind or a higher type, the cost of replacing
in kind the property so abandoned or withdrawn from service, less the
salvage, if any, should be charged to Operating Expenses. If, however, a
reserve for abandonment, as provided in paragraph 8 of these instructions,
or a reserve for accrued depreciation has been created with respect to such
property, the reserve account should be first debited with an amount equal
to the credits thereto made with respect to the property abandoned or
withdrawn and replaced; but if no reserve has been created in advance of
the .retirement of such property and the amount chargeable to Operating
Expenses is relatively large, so much of the amount as may be authorized
under the conditions outlined in paragraph 9 may be carried in suspense
for distribution to the operating expenses of succeeding years.
5. PROPERTY RETIRED AND NOT REPLACED. When property (other than
equipment), an addition to or a betterment of which would be chargeable
to the accounts of this classification, is abandoned or withdrawn from
service and not replaced, the cost (estimated, if not known), should be
credited to the account provided herein for such property; proper account
should be taken of any salvage; the reserve accounts for abandonment and
accrued depreciation should be debited with the amounts, if any, previously
credited thereto with respect to the property abandoned or withdrawn, and
the difference between the salvage plus the reserves and the cost should be
charged to Profit and Loss, to which should also be charged any incidental
expenses connected with the retirement.
6. LAND SOLD OR ABANDONED. If any land, except land the cost of
which may be classified under "Miscellaneous Investments" in the Form
of General Balance Sheet Statement, First Revised Issue, is abandoned or
its use discontinued, the original cost of the land (estimated, if not known)
should be credited to the appropriate accounts under Additions and Better-
ments and charged, less salvage from sale or other disposal, if any, to
Profit and Loss. If the land is retained by the carrier, it should be charged
at a fairly appraised value to an appropriate account to be included under
" Miscellaneous Investments " in the Form of General Balance Sheet
Statement, First Revised Issue.
7. EQUIPMENT. Accounting rules relative to the cost of equipment
acquired and equipment retired are contained in the text for account
A 33, " Equipment."
8. RESERVES FOR ABANDONMENTS. If so authorized upon application
to the Interstate Commerce Commission, a carrier may set up accounts
under Maintenance of Way and Structures in Operating Expenses with
340 RAILROAD EXPENSES
respect to important pieces of property (except equipment) to be aban-
doned, for the purpose of creating such reserves as will, at the time of
the abandonment, meet or reduce the amounts otherwise chargeable to
Operating Expenses or to Profit and Loss. Upon the abandonment of any
property with respect to which a reserve has been created, such portion of
the amount otherwise chargeable to Operating Expenses or to Profit and
Loss as will equal the amount previously credited to the reserve account
should be debited thereto.
9. DISTRIBUTION OF CHARGES FOR ABANDONED PROPERTY. In case the
amount chargeable to operating expenses for property abandoned directly
in connection with improvements is relatively large, and its inclusion in a
carrier's operating expenses for a single year would unduly burden those
accounts for that year, a carrier may, if so authorized upon application
to the Interstate. Commerce Commission, charge so much of the cost as
may be authorized to an account " Property Abandoned, Chargeable to
Operating Expenses, " as provided in the Form of General Balance Sheet
Statement, First Revised Issue. The amount so charged should thereafter
be apportioned to the operating expenses of succeeding years, the number of
which will be determined when permission to use the account is given.
10. CONVERSION OF PROPERTY FROM ONE CLASS TO ANOTHER. When a
building, structure or facility of one class is converted to another class, its
cost (estimated, if not known), should be credited to the appropriate
account under Additions and Betterments; and such cost, less depreciation
and the cost of any abandoned part of the property, should be charged,
together with the cost of improvements which add to the value of the prop-
erty, to the Additions and Betterments account under which it is classified
after conversion. If any part of such property is abandoned, the cost of
such part should be treated as is provided for property abandoned in
paragraph 4 or 5 of these instructions.
11. DEFINITION OF " COST OF REPLACING IN KIND." By the term
tl Cost of replacing in kind," as used in this classification is meant the
cost, at the current prices of labor and material, of renewing such property
by the construction or installation of other property substantially similar
in capacity, service, and accessories, and having a physical condition and
an expectation of life in service equal to that of the replaced property
when acquired, or, if improved after acquirement, when in its best condition.
It should not be construed as requiring an estimate based upon the current
prices of material identical with that of which the thing abandoned was
constructed, particularly when such material is no longer obtainable except
at prohibitive prices and would not be used if a renewal of the property
without betterment were undertaken.
12. TREATMENT OF ABANDONED PROPERTY WHEN COST is UNDERSTATED.
In case a specific piece of property, abandoned subsequently to June 30,
1907, had been, previously to that date, so improved through charges to
Income, Profit and Loss, or Operating Expenses, that the book value or
ADDITIONS AND BETTERMENTS 341
record value is much less than the actual cost of the property, a carrier may,
upon filing with the Interstate Commerce Commission a full description of
the property and qf the proposed improvements which require its abandon-
ment and a comprehensive statement explanatory of the conditions which
justify such treatment, and upon receiving the approval of the Commission,
accept such book value as a basis for computing the amount to be charged
to Operating Expenses with respect to the property abandoned. The
amount to be charged to Operating Expenses under such conditions should
be the same proportion of the cost of replacing the property in kind as the
book value is of the total actual cost.
13. OPTION IN CERTAIN CASES INVOLVING LESS THAN $200. If the
total amount chargeable to any account herein provided (unless it is speci-
fically excepted from this option) is less than $200 for any improvement
considered as a whole, the option may be exercised of charging the amount
expended to Operating Expenses as a renewal or to the appropriate account
in this classification. This is not to be construed as authorizing the parcel-
ing of expenditures in ordei; to bring them within this limit. If any unit
of property the cost of which is less than $200 is abandoned and not re-
placed, the option may be exercised (unless the accounts covering such
property are specifically excepted from this option) of making, no credit
entry with respect to such abandonment.
14. RECLASSIFICATION OF CHARGES. The net increase or decrease in the
investment as reflected by these accounts should be reclassified in accord-
ance with the accounts provided in the Classification of Expenditures for
Road and Equipment, it being required that all items affecting additions
and betterments be closed into the Road and Equipment accounts.
15. INCIDENTAL SERVICES OF EMPLOYEES. No charge should be made
against Additions and Betterments for incidental services of officers and
employees whose time is regularly devoted to other operations. If employees
are specially assigned to additions and betterments work, their salaries and
necessary expenses connected with that work should be included in its
cost. In the redistribution of the expenditures covered by this classifica-
tion in accordance with the Classification of Expenditures for Road and
Equipment, engineering expenses should be charged to account No. 1,
" Engineering," and not to the accounts representing the specific work
under construction or improvement.
16. SALVAGE FROM EQUIPMENT, TOOLS, ETC. When the cost of any work
equipment, machinery, tools, or materials and supplies has been -charged to
accounts representing the cost of work involving additions and better-
ments and the entire value thereof has not been consumed in the work,
the residual value of such- work equipment, machinery, tools, or materials
and supplies should be credited upon the completion of the work to the
accounts affected and charged to the appropriate equipment or material
17. RESERVE FOR ACCRUED DEPRECIATION. The accounts heretofore re-
342 RAILROAD EXPENSES
f erred to as " Replacement " accounts should hereafter be kept under the
name of * ' Reserve for Accrued Depreciation. ' ' The total of the credit
balances in these accounts is required to be shown under this title on the
balance-sheet statement. All debits to Operating Expenses (or other
accounts) for depreciation should be concurrently credited to the appropri-
ate accounts representing the Reserve for Accrued Depreciation on the
classes of property for which the charges are made.
18. CANCELLATION OF CONFLICTING PREVIOUS INSTRUCTIONS. This
Classification supersedes the Classification of Expenditures for Additions
and Betterments for Steam Roads, First Issue; and the rules herein pro-
vided supersede conflicting instructions in any other classification previously
TEXT OF CLASSIFICATION OF EXPENDITURES FOR
ADDITIONS AND BETTERMENTS
A 1. 'RIGHT OF WAY AND STATION GROUNDS
To this account should be charged the cost of land (of necer.sary width
conformable to depth and slope of excavations and embankments, including
borrow pits and waste banks adjoining right of way) acquired for road-
bed for additional main tracks; for new roadbed on account of changes of
line, and for the construction of new and the extension of existing sidings
and spur tracks; for additional station, terminal, and shop grounds, includ-
ing land for ingress to or egress from such grounds; also for additional
docks or wharves, and the cost of riparian or water rights necessary therefor.
The cost of stakes used to denote right-of-way limits; expenses of
appraisals or of juries, commissioners, or arbitrators in condemnation cases;
cost of removal of buildings from additional right of way or station, shop,
and terminal grounds purchased ^commissions paid to outside parties for
the purchase of additional right of way . and grounds for the
purposes above described; notarial fees, cost of plats, abstracts, re-
cording deeds; salaries and expenses of counsel, right-of-way agents,
engineers and assistants, when they are specially assigned to duties pertain-
ing to the acquisition of right of way and station grounds; payments for
right of way and station grounds on constructed lines, the title to which
lands had not been acquired and payment for which had not been made
before the construction accounts were closed; and payments for damages
to abutting property caused by the construction of additional tracks, etc.,
as above described, should also be charged to this account. (See account
A 17,." Elimination of Grade Crossings.")
NOTE A. Proceeds from the sale of improvements included in a purchase
of real estate, the cost of which is included in " Right of Way and Station
Grounds," should be credited to this account.
NOTE B. The $200 minimum referred to in paragraph 13 of the General
Instructions does not apply to amounts to be included in this account.
ADDITIONS AND BETTERMENTS 343
A 2. REAL ESTATE
To this account should be charged the cost of additional land (except
for right of way and station, shop, and terminal grounds), acquired for use
in the company 's operations as a carrier, and the cost of real estate acquired
in the purchase of additional right of way and station, shop, and terminal
grounds, but in excess of the land required for such purposes. This account
should also include incidental expenses (or the proper proportion thereof),
as enumerated in account A 1, incurred in the purchase of real estate
chargeable to this account.
NOTE A. In case the purchase of land for right of way and station grounds
involves the acquisition of real estate that is not required for such purposes, the
actual value of the real estate in excess of that required for right of way and
station grounds, or an estimate of its saleable value at the time of the purchase,
should be charged to this account.
NOTE B. When property charged to the " Real Estate " account becomes a
part of a carrier's right of way or station grounds the amount originally charged
should be credited to this account and charged to account A 1, " Bight of Way
and Station Grounds."
NOTE C. Proceeds from the sale of improvements included in a purchase of
real estate, the eost of which is included in the "Real Estate" account, should
be credited to the same account.
NOTE D. This account does not apply to real estate, the title to which is not
held in the name of the railway company, to any acquired for investment pur-
poses only, or to any not used in a carrier's operations, unless acquired as a
part of land that is bought for such purposes.
NOTE E. The $200 minimum referred to in paragraph 13 of the General
Instructions does not apply to amounts to be included in this account.
A 3. WIDENING CUTS AND FILLS
To this account should be charged the cost of increasing the width and
slope of established cuts and fills, excavating in order to convert tunnels into
open cuts, and filling in order to convert bridges, trestles, and culverts
into fills. It includes the cost of grading, clearing, grubbing, and material,
and incidental expenses not necessary to the maintenance of the cuts and
fills as previously established.
NOTE. The cost of restoring banks, to the established width, slope, or grade
should be charged to the appropriate operating expense accounts. The cost of
work done in the execution of a general plan of increasing the standard width
and slope of embankments should be divided between Operating Expenses and
Additions and Betterments, the charge to Operating Expenses being such propor-
tion of the total cost as the estimated nuumber of yards of material required to
restore the banks to the original standard bears to the total number of yards
moved in the work. There should also be charged to Operating Expenses the
cost of dressing the slopes of cuts and fills, reditching cuts, replacing berm ditches,
and necessary repairs co track, ballast, etc.
A 4. PEOTECTION OF BANKS AND DEAINAGE
To this account should be charged the cost of additional construction
of a permanent nature, such as piling, cribbing, riprap, walls, breakwaters,
levees, canals, dams, and other devices for the protection of roadbed, tracks,
344 RAILROAD EXPENSES
embankments, cuts, slopes, and other property iised in the operation of a
road from erosion or inundation by water. It does not include the cost of
structures or devices of a temporary character installed for the immediate
relief from or as a safeguard against damage by water.
NOTE. The cost of riprap at culvert ends or around bridge abutments or
piers, to prevent washing or scouring, is chargeable to account A 7, " Bridges,
Trestles, and Culverts," when not properly an operating expense.
A 5. GRADE REDUCTIONS AND CHANGES OF LINE
To this account should be charged:
For grade reductions (cutting down summits and raising sags without
materially changing the alinement) : The cost of additional grading, includ-
ing the rent and cost of operation of steam shovels and work trains; build-
ing temporary tracks for steam shovels and grading outfits; tools used in
the work; raising or lowering existing bridges; increasing the length of
culverts and replacing riprap at culvert ends; changing grade crossings for
farm or country roads, highways, or streets, including crossing gates,
alarms and watchhouses: less the .cost of replacing in kind grades or other
property abandoned or removed.
For changes of alinement (alteration of alinement for the purpose of
reducing curvature, cutting out bridges, tunnels, etc.) : The excess cost of
the grading, bridging, tunneling, etc., necessary for the change, over the cost
of replacing in kind the grade, bridges, tunnels, etc., abandoned.