Daily Kennebec journal., 1914-03-07
PLAYING FALSE
Continued from Page One)

conceal the facts by adding to its op
Grating expense accounts sums dis
bursed in improving its property; on
the other hand a financially weak road
seeking to inhance its credit by a good
showing of operating results would in
clude in its property accounts sums
expended in operation"
The result was that carriers an
nual and monthly statements of net
revenue often reflected nothing more
than the particular showing desired by
it's executive. These reports were often
used for speculative purposes, and the
stockholders and the general public
were left without any assurance as to
whether the dividends declared were
paid from income or surplus or out of
capital.
Under the accounting rules of the
commission, the st. Paul Co. was per-
mitted to include in it's accounts a
proper revenue for the transportation
of men and materials, rents for equip
ment and other of its facilities used
in the constructing of the Puget Sound
and interest on the funds advanced.
That course, however, was not pur-
sued. On the contrary, the st. Paul Co.
included in its income accounts for
the year 1910 all the interest, rents
and revenues assignable to the period
prior to July 1. 1909. the sum total
amounting to over $4,600000. In the
same year, it also decreased it's oper-
ating expense account by crediting
thereto more than 100000 on account
Of salvage of cars destroyed previous
to the year 1907. By means of these
entries the income of the Chicago, Mil
waukee & st. Paul Railway Co., for
the year 1910 was overstated by more
than $5,000,0 900. As result of this over
statement of income, the report of the
st. Paul Co. for the succeeding year
showed an apparent falling off in rev.
enue and income Of over s2,000,000.
In the report TO its stockholders for
the year 1911, the explanation offered
by the officers of the company was
the large increase in the net operat-
ing revenue is accounted for by the
inability to obtain increased rates and
the great increase in the cost of la
bor'
This statement was not in accord
ance with the facts. So far from be-
ing an increase in the expenditures
for labor during the fiscal year 1911,
the expenditures on that account were
about $4,000 less than in the previous
year, according to the company's own
reports to the commission.
THE delinquinces in the accounting
of the Puget Sound Co. are however.
of greater significance. A large traf-
tic was offered to the Puget Sound
line as soon as il wos opened and the
evidence before us leads us to think
that correct showing of the oper-
ating results for the first year would
have been most sufficient Not con-
tent, however, with statement of
facts, the income of the Puget Sound
was greatly over-stated, a variety of
eXredients having been resorted to for
this purpose"
"The general public interest demands
that the financial reports of carriers shall
be true records of the facts that they
purport to show. Public confidence both
at home and abroad in the financial state
ments rendered by our carriers is very
necessary to the further DEVELOPMENT of
our transportation facilities;. and to the
degree that the accounts of any carrier
are tainted with the suspicion of untrust.
worthlness to that extent they will end
to impair confidence among investors.
Accounting officers understand the true
functions of accounts and their instincts
and training are such as naturally to lead
them to keep their accounts as they
should be kept. But in many instances
the accounting officers of carriers have
not been left free to follow their natural
inelinations in this regard. From the
necessities of the case, it is tie account
ing officer who is Immediately responsible
and whom the commission will first hold
responsible when it becomes necessary
to invoke the penalties of law; but we
shall not hesitate to call to account with
even greater severity anyone above the
accounting officer in authority who may
share in the responsibility for any viola
tions of the accounting rules and regula-
tions which have been prescribed for the
use of the carriers
he IL.