This account should include the amount of dividends on capital stock, interest on funded debt, including interest on funded debt assumed, and rents under leases, accrued to the date for which the balance sheet is made but not payable until after the first day of the following month. There should be included also as "rents accrued" the amount of accrued dividends on the stock and accrued interest on the funded debt of other companies when such dividends and interest are paid as all or a portion of the rent under leases from those companies. 43. Taxes Accrued.

This account should include the amount of taxes accrued and charged against income in excess of the amount paid. When the respondent company leases the property of another company and, under the terms of the lease, agrees to pay or assume the taxes that may be levied upon or assessed against such property, the taxes accrued on such property should be included in this account and not in account No. 42. When, however, the taxes are paid by the lessor company, the full amount of cash rent to be paid by the lessee should be included in account No. 42. Deferred Credit Items.

44. Operating Reserves.

This account should include the ledger balances in the reserves created to cover past depreciation of property; reserves created since July 1, 1907, by charges to Operating Expenses to cover accrued depreciation of equipment and of way and structures when a plan for such purpose has been adopted by the carrier; reserves created by charges to Operating Revenues or to Operating Expenses to provide for overcharge, personal injury, insurance, and other claims; and similar reserves. The credits in this account should be subdivided as follows:

(a) Reserves for Replacement of Property.
(b) Reserves for Other Purposes.

The credit balance in sinking fund reserve account should not be included in this account. See account No. 47a, "Reserves Invested in Sinking and Redemption Funds."

45. Liability on Account of Special Trust Funds.

This account should include the ledger balances covering the amount of cash and the cost of securities in the hands of trustees or managers of employes' savings funds, relief, hospital, and other association funds, when such trustees or managers are acting for the carrier in the administration of such funds. The amount reported in this account should agree with the amount reported in account No. 22, “Cash and Securities in Special Trust Funds."

46. Items in Suspense.

Under this caption should be included suspense accounts showing credit balances that cannot be entirely cleared and disposed of until additional information is received, such as collections by general agents and others to cover prepayment of shipments originating on lines of other carriers; amounts realized from sale of damaged, unclaimed, and over freight and held pending claim; switching charges of other carriers collected and held awaiting bills from such carriers; amounts received from sale of mileage tickets to be disposed of as mileage is honored by the respondent or other carriers; amounts collected for milling-in-transit privileges, to be cleared when products are shipped; credit balances in "Shop Expense" and "Store Expense" accounts; and other similar items.

Appropriated Surplus.

47. Surplus Reserves.

In this account should be grouped all appropria

tions of surplus (except as covered by account No. 48), including unexpended balances of appropriations for additions and betterments. The account should be subdivided under the following heads:

(a) Reserves Invested in Sinking and Redemption Funds.

Amounts charged against Income Account for sinking fund payments; accretions to sinking funds in the hands of trustees; also amounts realized and turned over to sinking fund trustees or used in the purchase of outstanding obligations either by sinking fund trustees or by the respondent company, when such sums are realized from other sources than the company's income. All credits to this account to cover amounts turned over to sinking fund trusttees, and all accretions to sinking funds collected by trustees, should be debited to the account with such trustees in account No. 20.

(b) Reserves Invested in Other Special Funds. (c) Reserves Not Specifically Invested.

48. Additions to Property through Income since June 30, 1907.

This account should include the cost of property acquired by expenditures of appropriations from Income since June 30, 1907, whether such expenditures are for new lines or for additions and betterments to existing lines. The amount standing to the credit of this account should be included in the amount reported under account No. 1-B, "Road and Equipment since June 30, 1907."

Free Surplus.

49. Profit and Loss-Balance.

This account should include the balance, if any, standing to the credit of the profit and loss account.

When there is a debit balance in the profit and loss account, but such balance does not exceed the

total credit balance of accounts Nos. 47 and 48, the latter are to be stated in short column, the total brought down, and the debit balance of account No. 49 deducted therefrom, the difference being extended to the total column as the net appropriated surplus. When the debit balance standing in account No. 49 exceeds the total credit balance of accounts Nos. 47 and 48, the accounts are to be stated as prescribed in the text of account No. 24.

SECTION G.

THE ACCOUNTS OF A TELEPHONE COMPANY.* I. Objects of Accounting Scheme.

A suitable scheme of accounting for the Bell Telephone System must attain these objects.

1. It must be uniform in its essential and fundamental features so that the results of the business can be compared and combined.

2. It must be elastic in details so as to furnish at the one extreme the simple information needed with respect to the numerous small exchanges and at the other extreme the great and complicated variety of information needed with respect to a large city system with every degree of greater or less detail for the conditions between these extremes.

3. It must be sound in principle so as to meet the most rigid scrutiny of investors and public authorities.

4. It must conform to organization so as to associate the strong and weak spots with the individuals responsible for them.

5. It must be practicable in application, speedy in operation and dependable in results.

II. Limitations.

A bare statement of these objects to be obtained suggests at once not merely the difficulties to be expected in constructing such a scheme of accounts but also certain natural limitations which must be respected or the scheme will fall of its own weight. A brief reference to some of these limitations may assist in the general understanding of the work as a whole.

1. A scheme of accounts is a distribution of the financial

* Reprinted by permission of Charles G. DuBois, Comptroller of American Telephone & Telegraph Company.