James Shirley Eaton.

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times before they wear out. But because the items which form
the tool account are individually so small and so miscellaneous


it is impracticable to set them up on the books and follow them
with a maintenance expense that shall hold them intact. They
are therefore classed with supplies and " charged out " as pur-
chased, as if they were physically consumed with use. We are
in this way relieved from making the distinction between a tool
and supplies, which at the last reduces to an arbitrary refine-
ment. " Stationery," however, is a special line of supplies which
by time-honored custom is considered always to be a class by
itself, under the heading of " Stationery and Printing," and
withdrawn from this account. Surveying and drafting instru-
ments are considered a special engineering or office facility and
are not classed as " Tools," but are charged as an office expense
of " Superintendence."

The articles which conform to the description given are
tools for working rock, dirt, iron and wood, such as stone
drills, sledges, crow bars, shovels, picks, hoes, post hole diggers,
portable furnaces, steel cutting saws and drills, chisels, ham-
mers, saws; they are implements for handling ballast, ties,
bridge timber, such as ballast forks, tamping bars, railbenders,
rail tongs, adzes, spike mauls, spike pullers, cant hooks, track
jacks and track levels.

The supplies are oil for lighting and lubrication, coal, waste,
flags, lanterns, ice and oatmeal for drinking water, and similar

The tools and supplies decribed above are charged to this
account when used in repairs of track, buildings, bridges, docks
and wharves, or any other M. of W. and S. work, but with the
following exceptions: tools and supplies used on work trains
are part of the work train expense and cleared as a whole direct
to the work done; supplies used by bridge foremen or watch-
men or in the repairs of stationary engines at draw bridges;
tools specially furnished for removing snow, sand and ice ; tools
and supplies cleared through " Gravel Pit or Quarry accounts " ;
supplies furnished snow shed watchmen; special tools in main-


tenance of signals and interlocking plants and in telegraph and
I telephone and power transmission lines. These exceptions are
due to the fact that in the uses specified as exceptions the
tools and supplies are of a special character, and have no gen-
eral serviceability.

19. Injuries to Persons. The modern theory is that a prod-
uct shall bear all the expense incident to its production, includ-
ing the expense of accidents. This theory is reflected in the
revision of the former I. C. C. classification of expenses.
Whereas " Injuries to Persons " was formerly a charge to a
single account for the road as a whole it is now located to par-
ticular departments as a part of their particular expense.

Accidents arise directly from careless acts, or indirectly
from careless acts which are responsible for defective construc-
tion. A department assumes the personal injuries expense for
all accidents caused directly by careless acts of its own men
(for which the railroad is held responsible) regardless whether
the victim be its own employee, the employee of another depart-
ment, a passenger, or anybody else. For instance, it has been
ruled that the expense for a track man killed by a passenger
or freight train is chargeable to Transportation Expenses, while
in case of a prospective passenger at a station, killed by a work
train, the charge is a M. of W. and S. expense (Case 165).

But accidents due to defective construction appear to be
considered as part of the general risks of the business which
each department assumes according as it may be exposed,
unless the accident be in transportation service, when the Trans-
portation Department assumes the full responsibility of safe
transport. Thus the expense of injury to a shop employee due
to construction of the building in which he worked would pre-
sumably be a M. of E. expense although the original fault might
lie with the department of M. of W. and S. The "Personal
Injury " expense arising from a derailment caused by a broken
rail would be charged to Transportation Expense, regardless


whether the persons injured were " pay " passengers, Trans-
portation Department employees or M. of W. and S. Department
employees, provided only they were in the care of the Trans-
portation Department for safe transport (Case 164). But if
the party injured is not the employee of another department,
nor a passenger, and the accident is due to defective work of
the M. of W. and S. Department the expense is borne by the
department at fault. Thus injury to persons at a road crossing,
due to faulty construction is charged to " Injury to Persons,"
M. of W. and S. (Case 304). This interpretation of the classifi-
cation for damages for personal injury, differs from the appar-
ent intent in case of property damaged. In case of property
damage, each department bears its own expense of restoring
conditions, regardless which department was at fault, whether
by direct act or as a secondary consequence of an act, through
defective construction (Case 392).

The expense of "Injuries to Persons," includes, together
with the actual amount of personal injury settlements, all
doctors, nurses, attendants, hospital and funeral expenses and
incidental transportation. The staff of claim adjusters, like
that of physicians, is not considered a part of the fixed staff of
the road, but its expense is absorbed in the accounts where the
settlements which they adjust are charged. When other depart-
ments (except the Law Department) are drawn upon, in adjust-
ing claims, any expense incurred or loss of time, is billed to this
account. Incidental legal services, because performed by a
staff which generally is a part of the standing organization, and
because performed in the line of its regular duty, are not a
charge to this account; but expenses such as plaintiff's court
costs, when paid by the railroad, and wages and traveling
expenses of employees attending court, are expenses specific to
the case involved and are chargeable to this account (Case 34).

Contributions by the railroad as a whole to the support of
hospitals, are arbitrarily apportioned, one fourth to M. of W.


and S., one fourth to M. of E., and one half to Transportation
Expenses, under the u Injuries to Persons " primary account.

Because of the contingent character of this account it is
permissible to apportion it monthly on some arbitrary basis,
by setting up a reserve or insurance fund to meet the actual
charges, but such arbitrary charges must be adjusted annually
to the total of the actual charges in order to include in the
year's expenses the actual expenses of that year.

20. Stationery and Printing. Administration involves office
work for handling correspondence, pay-rolls, documents, draw-
ings and studies. " Stationery and Printing " is the term used
to cover stationery supplies and a certain class of tools for office
use. Stationery supplies are distinct from general office supplies
such as ice, water, cleaning material, fuel for heat, or oil for
light, or chemicals for telegraph service, or commissary supplies
for special cars. They are directly related to some form of
stationery or the use of stationery, such as postage, pens,
sponges, tracing cloth, twine, binders, wrapping paper, ink
stands, mucilage, paper weights, etc.

The tools for office work which are included are typewriters,
calculating machines, addressographs, dating stamps, pencil
sharpeners, water holders, copying presses, mimeographs and
like articles. These ifems are primarily desk facilities which
have latterly been so perfected that some of them have become
machines of greater compass and value than the desk itself.
Nevertheless, they are not put in the class of desks, chairs
and furniture, which latter are classed as " Office and Other
Expenses/ 7 under " Superintendence." " Stationery and Print-
ing" apparently began with simple items of desk facility, such
as pens, ink, pencils, pen racks, blotters and ink stands, small
items nearly of the nature of supplies, the distinguishing
characteristic of supplies being that they are consumed as
issued. Dictionaries, periodicals and technical books are some-
what of the nature of office tools, but they are classified as office


supplies under " Superintendence." This is possibly upon the
theory that they are for the more especial use of the official
rather than of his staff.

Stationery for reports from one office to another is generally
chargeable to the offices where the reports issue, somewhat on
the theory that a telephone expense falls upon the party making
the call. With stationery supplies is charged as stationery
expense any incidental expense of procuring and distributing it.

This account of " Stationery and Printing " is distinctly an
administrative expense. It is generally the largest item of
office expense. The things here charged may be direct labor
savers in the office, but at all times, as facilitating supervision,
they indirectly effect savings elsewhere. The offsets to the
increases here may be very much larger decreases elsewhere.

Comment : We are inclined to think that " Stationery and
Printing" does not, from its character, justify a heading of
expense for it alone. It is a large item, but we believe it to be
practically of the same class as " Office and Other Expenses."
The factors that control it are more closely related to the office
where the expense occurs than to any inherent, all pervasive
quality running through the items of material whose expense
is brought together here. It is an obsolete classification.

21. Other Expenses. This account is necessary for factors
that cannot be foreseen. Items chargeable here are of an extra-
ordinary character, such as special expenses in case of strikes
or in the entertainment of visitors, or special donations not
otherwise provided for. But premiums awarded for excellent
work are charged under " Superintendence."

22-23. Maintaining Joint Tracks, Yards and Other
Facilities, Dr. and Cr. In the interlacing of the transportation
systems there are many terminals which for the sake of con-
venience and economy are made to serve two or more carriers
jointly although the property of but one carrier. The charges
and credits must be exchanged to cover such service, but at the


time it is important to keep the detail statistics in such
form that expense items shall be offset by their units of property
and operation. As a device to accomplish this the above accounts
have been set up. By this means a railroad can charge out to its
several items the maintenance of a yard which it operates and
then without disturbing such statistical accounts, can take
through this account, in a lump offset, the credit by the amount
of the debit passed to the other railroad. The other railroad in
turn, by the same device of the debit side absorbs the expense
but does not disturb its detail expense accounts.

When one of the carriers does not report to the I. C. C. the
account " Maintaining Joint Tracks, Yards and Other Facili-
ties," does not apply to the amount that such non-reporting
carrier is involved. The portion involving a non-reporting
carrier should be withdrawn and handled like any ordinary bill.
Joint facilities bills should be divided into the part correspond-
ing to expenses of maintenance and operation and the part cor-
responding to rents, and applied directly to accounts and
primary accounts affected from the joint facilities accounts as
debits or credits as the case may be. This account was set up
as a device for leaving undisturbed in a carrier's accounts its
detail of expenses against its units of operation, and for avoid-
ing the consequent duplications when the figures of all the rail-
roads were aggregated. In case the other carrier does not
report to the I. C. C. under this plan, there can be no dupli-


This block of expenses includes the cost of upkeep of the
equipment of the railroad, which equipment is, technically, mov-
ing units. Such are primarily the moving units in commercial
service, as the cars and coaches, locomotives and motors that
move on the rail, and the floats, barges, ferries and tug boats
that move on the water (except such as are used in Outside

In addition to the equipment used in commercial service is
included equipment used in non-commercial ("company") ser-
vice, such as work train cars and locomotives. These expenses
are further made to embrace all large roadway tools which
move on the rails and are not propelled by hand or by small
motors, as snow plows, steam shovels, and wrecking derricks.

The repairs, the renewals, and the depreciation are compre-
hended in this group of expenses, and are itemized because they
severally bear different relations to the uses of the current
month in which charged. The expenses contemplate an organ-
ization and a supervising staff with a plant, tools and office
facilities with which to work. The organization takes care of
its own personal injuries, its supplies and unusual expenses,
but does not assume charges for the investment involved in its
plant, nor for the maintenance of such plant. We believe the
scheme of the classification to be defective in the two particulars
last named.

Repairs, Renewals and Depreciation. The upkeep of
equipment embraces every kind of maintenance work and


expense applied to this equipment, from the tightening of a
nut to the replacing of an entire locomotive or car. The theory
of maintenance is what the word literally implies, namely the
maintaining of the equipment against wear and deterioration,
in the same condition in which it was originally received. But
this is a theoretical conception of maintenance which in day
to day practice cannot be exactly carried out. The processes of
wear and deterioration go on all the time, with more or less
regularity, but the repairs to restore the worn and wasted parts
come at intervals. Between prime condition and unserviceable
condition is a wide margin, through which the equipment unit
passes from the time of one " shopping " until another " shop-
ping " or Jbejtween the original purchase of a new locomotive
or car and its ultimate scrapping when replaced by a new
locomotive or car. The equipment unit itself is composed of a
great many parts, having various periods of normal life. Thus,
on the locomotive there is the wear of packing rings, brake
shoes, and tires which has to be currently provided for, and
there is the decline of the fire box which may last many years
before replacement. And between these extremes are all grada-
tions. The purpose of an expense classification is to set cause
against effect, that is to group against productivity of a cer-
tain period which we will call the result the expenses which
contributed to this result, which expenses we will call the
cause. In a scale where the gradations of upkeep as indicated
above, are so imperceptible, there must be some arbitrary point
below which we consider the expenses a direct off-set to current
use and productivity, and above which we assume the expenses
produce a serviceability over an extended period. This distinc-
tion is made in the use of the common words, "Repairs and
Renewals." "Repairs" of equipment is understood to be all
upkeep short of the actual replacement of the engine or car by
a new engine or car. " Renewals " is defined to be only those
expenses which come at the time of the demolition of the


entire equipment unit. It must bo clearly understood that this
distinction, in last refinement, is an arbitrary one, but in apply-
ing it in the compilation of figures to large aggregates, it serves
as a significant grouping of figures for practical purposes. If
at any time the renewals run high, it is a fair deduction that
we are accumulating a reserve in our equipment above the line
of minimum serviceability, and this reserve is not all consumed
in the current earning period.

To avoid this irregularity the statistician endeavors to deduce
from the actual renewals over a period, a formula of the normal
rate of deterioration per year for all of his equipment of differ-
ent classes. On the basis of this formula he arbitrarily charges
expenses, under the designation of depreciation and sets up a
replacement fund. Here he accumulates month by month the
values on which he may draw when the actual renewal takes
place. When an equipment unit is actually demolished the
expense of the new unit is charged to the replacement fund,
and only the excess, if there be any above the amount which has
been previously accumulated in the replacement fund, is charged
to renewals. " Renewals " becomes, as it were, the adjustment
account through which any deficiency of the formula for depre-
ciation is charged to expenses.

In M. of W. and S. there is no general distinction between
repairs and renewals, nor is there any provision for a deprecia-
tion charge on the basis of formula. This does not mean that
M. of W. and S. is in any way essentially different from M. of
E. except that equipment comes in fairly uniform unit?, while
the parts of the way and structures are irregular, and most of
them are not detachable entities. In M. of E., the equipment
unit serves as an arbitrary dividing line between repairs and
renewals. In theory, replacement of parts less than the com-
plete unit is repairs; replacement of th complete unit is
renewal. In practice the ruling is " When any equipment is in
such physical condition that it must be practically rebuilt in


order to fit it for service, or when any equipment requires
repairs which, if made, would constitute the major portion of
its value, it should, when taken out of service, be considered as
retired and be written out of the accounts . . . upon being
rebuilt, the cost of replacing in kind the equipment as rebuilt,
(consideration being given to second-hand parts remaining
therein) should be charged to this account." (Additions and
Betterments " Equipment ".)

Locomotives and cars have so many parts and appurten-
ances which may be added or left off, or made to conform to
different standards that the line between repairs and renewals,
on the one hand, and Additions and Betterments on the other
hand, is n^t^always^easy to define. Maintenance extends to the
point of replacement in kind. This replacement in kind, as we
have seen, means a replacement that continues the function of
the thing replaced without adding to or deducting from that
function in its efficient relation to all the other parts. To
change the efficient life period of a thing is to so far change its
function. To change the capacity of a thing is to change its
function in the same degree. To change the maintenance cost
of a thing by redesign is to change its economic function
among the body of other things with which it functions. As
noted in an earlier chapter, the obsolescence (change of
function) which is left to be absorbed by maintenance is very
loosely defined. By the same token the betterment (change of
function) which is charged to Additions and Betterments is
left, for the time, very much to local determination in equipment
disbursements. The practice of railroads tends to absorb in
expenses the cost of new appliances and betterments which are
to meet requirements imposed on the railroads without corre-
sponding effect on their net revenue. Automatic couplers and
safety devices are in this class.

24. Superintendence. Under the subhead of " Pay of
Officers " this account includes the salary expense of the super-


vising officers and assistant officials. These are designated
" Officers " directly in charge of equipment. The administn
tive officers included, range from vice-president to master
builder, master machanic and general foreman. With eacl
official is included the assistant official, if he has such a title.

Next after the administrative officer is included the train*
expert having official title, such as the mechanical engineer, th<
electrical engineer, and the chemist. The staff officer wh<
inspects under such titles as chief car inspector, or traveling
boiler inspector, is considered likewise of the official family, an<
his salary expense is charged here.

All of these officials are related to the general function oJ
maintaining equipment, either cars or locomotives or both. The:
have under them a foreman whose expense is not charged to this
general account, but is " loaded '' on the direct labor exp(
of the workmen under his supervision. For illustration, this
account reaches down the grades of administrative officers
the rank of general foreman. This man has under him several
shop foremen, each of whom may have in turn several gan{
foremen. All the men below the rank of general foreman are
direct expense to the work done by their workmen.

" Superintendence" is conceived to be a different thing from
supervision. The former, for instance, includes the pay of
chief car inspector and general car inspector, but not of local
supervising car inspector. This last official's duties come under
the term " Supervision." " Superintendence covers officials
having territorial jurisdiction over several points or several
departments" (Case 264).

The equipment is maintained by the M. of E. Department,
but it is operated by the Transportation Department. The way it
is used in service is a large factor in the cost of its maintenance,
so travelling inspectors such as road foremen of engines are
employed to instruct the men in the use of the equipment.
These are operating men and their expense is charged to Trans-


portation Expenses because equipment is supposed to be used in
some standard way, and these men are to enforce such standard.
But the inspection of cars or locomotive boilers is an inspection
of the equipment itself, and therefore is a M. of E. expense.

The salary expense of the staff of clerks and attendants
belonging to officials designated above, is. lodged under the sub-
head " Pay of Clerks and Attendants." All these are on a
salary basis or are practically a fixed force. They may include
expert service not of official rank, such as draftsmen. The
clerks and attendants adjust themselves to all the shifting
requirements of administration. The office is supposed to keep
its own house in-order7 and in interchanges with other offices or
departments to meet the other offices half way. But in the
re-arrangement of function of some of the other offices or depart-
ments dealt with, the burden is irregularly shifted back and
forth between them, without any very well defined principle as
a guide. For instance the auditor extends his functions to
compile the pay-rolls previously made by the office itself. Shall
this expense remain here at the local point in form of a propor-
tionate charge of the whole, or shall the general office bear the
full expense although its added burden is directly to release the
local office? Because the general accounting office is in process
of evolution and its ultimate definition of function has not yet
been given, this is a difficult question.

The expense of officers and staff constituting this account of
" Superintendence " is for the maintenance of equipment.
Should any considerable part of the time of such officers be
regularly devoted to service of other departments, a correspond-
ing charge must be made. In case of an officer having direct
jurisdiction over two or more departments his salary is appor-
tioned. To avoid quibbling in a matter where no formula could
be exactly justified this division is made arbitrarily of an equal
amount to each such department served.

The two foregoing subheads are confined to the salaried



expense of " Superintendence." The subhead " Office and Othei
Expenses" embraces all disbursements (except for stationery
and printing) for other than labor, or for the very occasional
labor that does not go on the pay-roll and is treated as an
expense, such as an occasional day's work cleaning office, or
repairing furniture. These disbursements are for supplies, (not
stationery) for furniture, telephone and telegraph service, heat,

Online LibraryJames Shirley EatonHandbook of railroad expenses → online text (page 8 of 52)