APPENDIX. UNIFORM SYSTEM OF ACCOUNTING FOR WATER-SUPPLY ENTERPRISES. INTRODUCTION AND DEFINITIONS. Introduction. The desirability of uniform accounts as a basis for uniform reports by cities and their industries has in recent years been recognized by an ever-increasing number of accountants, economists, governmental officials, and public writers. Past experience demonstrates, however, that if this uniformity is ever to be attained, it must be accompanied by a common language of accounts or the universal use of common terms with the same significance. To open the way for this result, schedules and schemes of uniform accounts should be accompanied by a carefully developed nomenclature, and all the terms employed should be defined. It is for this purpose that definitions are here presented in connection with an outline scheme of uniform accounts for water-supply enterprises. It is earnestly hoped that such of these definitions as commend themselves to accountants and economists will be adopted, and that objections to, or suggested improvements of, other definitions will be sent to the Bureau of the Census. In applying the science of accounting as an aid to the successful administration of a private business or enterprise for gain, such as are all privately conducted water-supply enterprises, two principal classes of accounts are always employed, here spoken of respectively as "balance sheet accounts" and revenue and expense accounts." In addition to these two principal classes of accounts the greater number of public and private enterprises keep additional or supplemental accounts to aid in furnishing the information needed for their systematic and scientific administration. Balance sheet accounts.-The balance sheet accounts of a watersupply enterprise are those ledger accounts in which is kept a record of the wealth in the possession or control of the enterprise, and of the claims of its creditors and trust beneficiaries upon, and the equities of its proprietors or owners in, the wealth possessed or controlled. They are the accounts which, when properly summed up in a statement called a "balance sheet," will present a correct exhibit of the financial condition of the enterprise at a specified time. These accounts are by some accountants called indicant accounts. Revenue and expense accounts.-The revenue and expense accounts of a water-supply enterprise are those ledger accounts in which are recorded the amounts that accrue as revenues or as expenses as a result of the operation of the enterprise. They are the accounts which, when properly summed up in a statement called a "revenue and expense account" or "income account," or by some other characteristic designation, disclose the result or outcome of the business for a given period of time. TECHNICAL TERMS EMPLOYED IN BALANCE SHEET ACCOUNTS. The financial data recorded in balance sheet accounts, when classified according to character, are readily divided into three principal classes and a large number of subordinate classes. The three principal classes are those to which are here given the designations "assets," "liabilities," and "proprietary interests." The subclasses are given names which are indicative of the character of the data which they include. If these various classes and subclasses of data are recorded in separate accounts, the accounts should in each case be given more or less descriptive designations, according to the character of the data recorded therein. Prefatory to a description of the balance sheet accounts suggested in a tentative way for water-supply enterprises, definitions are here given of the accounting terms "assets," "liabilities," and "proprietary interests," and also of the principal specific designations applied to their subdivisions and subclasses. In connection with such definitions, definitions are also given of other accounting terms employed in the instructions here presented for the suggested accounts: Assets. The assets of a water-supply enterprise are the properties or wealth in its possession or control or at its disposal, including rights of action, franchises, good will, and other rights having a money value. Actual and nominal assets.-The accounts of an enterprise in which are recorded its assets sometimes contain the record of (1) amounts due from the enterprise to one of its funds, or from one of its departments, divisions, or accounts to another; (2) shares of 90196-10- -33 stock issued by it and held in its general treasury or by one of its funds; (3) amounts which represent accrued costs and losses to be charged as expenses of future periods or which constitute other offsets to the credit balances of liability and proprietary interest accounts; (4) wealth which is not now in its possession or control but which may come into such possession or control under certain circumstances or subject to specified conditions. Changes in the total of these amounts do not increase or decrease the wealth in the possession of the enterprise, and hence these amounts represent wealth in name only. They are accordingly here called nominal assets, to distinguish them from wealth actually controlled or possessed, here called actual assets. The amounts mentioned under (4) are generally called contingent assets. There are many bases upon which the actual assets of an enterprise may be classified, and for this reason there are a large number of specific designations which may be applied to such assets. Classified with reference to form or character, the assets of an enterprise are spoken of as tangible, intangible; classified with reference to character they may be referred to as landed, and nonlanded; and when classified with reference to the principal purpose of the business, they may be separated into two groups called, respectively, fixed assets and floating assets. The tangible assets of a water-supply enterprise are the material or tangible wealth held or controlled by it, including land or landed assets, improvements on land, water-supply system fixtures, equip(511) |