The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1893-01-16
TRICKS OF A TRADE.
A Railroad Auditor Betrays
Some Secrets.
HOW RATE CUTTING rs HIDDEN.
Interesting Points On the Cooking or
Accountable Spokane & North
ern Extensions.


secrets of railroad accounting, and 1t is
particularly interesting, as it dIscioses the
means by which rate-cutting and discriIni-
nation are carried on. but are concealed IN
the accounting department.:
In the accounting department are kept the
books showing the financial transactions OF a
railroad OF whatever nature, and when prop.
cry organized 1t should have ell papers On aIs,
or Immediately under control 10 sustain the en-
tries On such books. rs duties may be stated
more explicitly as follows: All reports from
AGENTS and conductors showing tickets sold.
freight shippec ana cash coll ecsed are audited,
copies OF waybiis and nsnifests, Cancelled
tickets and coupons of tickets being forwarded
10 il 20 sustain the report. Accounts OF indiyid-
uaIs and companies IL favor OF or against tie
road are treated. contracts are construed and
their financial results covered. Vouchers FOX
disbursements are scratinized and cert. fed TO
or rejected, the case may be, aud II cor
rect duly entered on the books. Coupons paid
on account of interest the funded
debt are received, examined and the proper en-
tries made. Receipts and disbursements are
duly recorded and a daily check made OF the
treasurer's cash. Pay rolls examined, ceTti-
fed to and proper distribution made of the
amounts involved TO the respective expense
and capital accounts. Careful account Is kept
of the stock OF material on hand and its dissr
button. Weekly estimates OF the earnings are
the earnings and expenses are complied, sup
pienented with balance sheets and detailed
statements In other words, no transaction In
voIving money, directly or Indirectly can be
male without the knowledge in fail detail of
the head OF this department. II is clear that a
vest responsibility is imposed upon it's chief,
since the accuracy of the figures showing the
results of operations presented to owners and
the public depends upon his ability, experience,
industry and integrity.
When this department. is not Improperly in
ter!ered with by the management, accurate
statements are generally made, ana aI inter
ested have fair opportunity thereby to estl-
mate the value OF any property in question, per
Be. and as TO its earning capacity, as well as to
Judge OF the eapabiiiiy of those intrusted with
its management
Results OF interference by superior officers
In the case OF a ROAD that Is prosperous from the
fact that 1t has a large volume OF traffic at fair
rates, there is no inducement for the manage
meat to Interfere, and this department may b.
reasonably sure OF continuance in office. III
Though its personnel may not be able, aud pros
peFity arise from conditions and causes entirely
beyond its control. The same may be said also
OF that class of roads that have been made pros
porous and continue 81 through the ability OF
its operating officers. But when, through the
operations of mpeting lines, the manager OF g.
road finds that the revenue is falling away
largely while the expenses are at minimum,
that he is unable TO cope with the situation and
fears a loss OF position If the facts become
known, the temptation to .cook'' the accounts
IL very great.
One OF the favorite methods OF cooking is as
follows: When 1t il found in making up the
monthly statements that the expenses are
largely out OF proportion TO the earnings, the
former are reduced so as TO make a fair showing
and the reduction charged TO suspense &C.
count" thus setting up the net earnings to
shout the usual amount, and trusting TO future
months when earnings may be greater TO credit
the suspense account" and charge expenses;
but Ii there are no such months prior to the end
of the fiscal year il is charged off to profit and
loss" Meanwhile, on the condensed balance
sheet, it is concealed by combination with other
accounts. This suspense account would
stand on the debit side OF the balance sheet as a
fictitious asset-means which have been ex-
pended but not applied.
To illustrate: A few months since New
England road changed hands, and the daily
press Informed US that the following mauipula-
ton OF accounts was discovered "At n meeting
OF the directors the general manager would pre-
sent each month financial statement showing
regularly surplus over expenditures Ia No
vem5er this surplus was $4,000, according 10
hgures presente by him. aud yet at the end of
the fiscal year December 81 there was a deficit of
fiSs.Dn This was complete surprise TO the d-
rectors who had taken without question the
monthly statements. When an exanina alton
was made by accountants it was discovered that
asysIetn had been adopted IN keeping the books
by watch funds were carried forward as assets
tha' had actually teen disbursed, and appar-
ehtiY the one emu IN view was 10 make a fine
showing on the books OF the management"
without going into details, other methods of
cooking may be mentioned, such as Unequal
distribution OF laxss aad insurance in state.
Ineni- OF monthly expenses; credlting expenses
OF 'he current year with judgments obtaiued on
account oi suiis originating III previous years;
keeping amounts charged 20 material accounts
after the material has been used: carving ex-
peases belonging Ia the currenI year 10 the fol-
lowing year: increasing inventories of material
on hand arShe close OF the yesr arbitrarily 10
the end that the excess over led ger accounts
may b. credited - expenses. Increasing gross
earnings by creditiug freight on the company's
material; crediting profits shown on balance
sheets OF corporations, owned or controlled
aceruing in past years. To current expenses;
charging renewals Of equipment bridges etc.
Ia capital accounts instead OF expenses
Freight accounts-ln auditing these the fol-
lowing irregularities ate found: Paying re-
bates directly, but making vouchers therefor IN
Indefinite languagc without sustaining paperx
wayoil'ine from a competing point on a line
when tae rea! shipping point - non-competi.
tive, SO as 10 obtain over rates owe. the foreign
road. H-viug shipments made from distant
competing point beyond the iuj,ia, or junction
points u competing points beyond the terminal
or other junction points and stopping The goods
ON your line, 80 10 give your patrons s. pfo-
portion IF cheap through rate, or ava1I your.
self al &; IN the matter OF Company's material
Indirectly wing rebates 10y permitting ship.
1nonts free uynT p4rt of liue IN II certain
point without Regular wayblliiug, ami then
have them duly way b. Ell from that point as II
originating there Paying shippers salaries and
commissions hiring their CLERKS, renting their
buildings or docks, hiring their cars. paving Tor
tEg:r kilograms, drayacc AMI switching, giving
spec tir sums 10 have freight diverted - a linz.
furnishing Tree passes, taking advantage al
,afljus-u-trausit 10 make local rate from N H.
ing paint the same a. the balance Of the through
fa.e when desirable, aclug mere tonnage IN
Than way bills cal ior, classifying cam.
moaitles falsely, etc, etc.
Ticket accountable Irregularities IN the
passenger department are numerous - the
ingenuity ~ its officers are able 70 devise Tin,
following are soiae II them: Paving cx1r3ttaDt
commission, selling limited tickets AZ low rstss
and Tcfuudlug Waite Of unused yortlan stter
date OF limit has expired, or extending date:
giving free massage 70 influence business: sell
Ing second class tiCAets viii privilege of PAIL
maa s.ecpcrs; furnishing sca.i'rs tickets L, - A
al low rates and covering up Il ference between
rates sold and regu ar rates with commissions
salaf las. etc. Apropos q! this last have known
regular tickets TO BE- sod from Chicago - New
York for 81 each, when the rate hy the differ
eati&l lines was IS. and by the others So, Az /