Accounts: Their Construction and Interpretation for Business Men and Students of Affairs

By William Morse Cole | Go to book overview

CHAPTER TWENTY
SOME GENERAL PRINCIPLES ILLUSTRATED IN MUNICIPAL ACCOUNTING

WE have so far been considering accounts chiefly with reference to profit and loss. Some accounting has really a very different purpose, may indeed have little or no profit or loss connected with it. Such chiefly is the accounting of municipalities and other political bodies. Though the accounting of administrative organizations like a city government is usually pretty bad, excuse can be found in the fact that the system in use is likely to be traditional. In the old days of administrative government in this country, the financial operations of the municipality were few. The city needed to recognize practically nothing more than the responsibility of the town treasurer. So long as the books showed that he had accounted for every cent received, the town was satisfied. As the municipal activity grew, paving, sewerage, etc., were gradually added on a small scale. The question then arose whether this or that administration of town affairs was the more economical. Each administration told itself that it must show a low cost. It therefore, when possible, neglected to allow for depreciation or for any but imperative maintenance, and showed expenditure at its lowest basis. When, on the other hand, conditions reached a point at which renewals became necessary, the administration in charge pointed to them as really charges upon the past, or treated them as capital investments, thus shifting the odium of increased cost. Most cities make no distinction between the cost of a new ferry-boat and the cost of painting an old one, or between the cost of a new boiler and the wages of a man to run it. The result of all this is that in most cities no correct figures of actual cost have ever been published. The community perhaps remembers reported cost in the years when good luck favored the administration, so that maintenance and renewal were low; and all higher costs have been discounted by vague excuses. A low figure has become a standard which no administration can successfully reject unless it can effectively point to extraordinary cost for renewal or for capital account.

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