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i. e., converting Accounts Receivable into liquid ning July 1st next, and I would like to appoint as working capital.

Investment Budget Control
Security Holders' Records

It is recommended that these Committees, authorized by your Executive Committee in February, be continued next year, and that, as far as possible, the personnel remain as now constituted, in order that the purposes of the Committees may be carried on free from interruption due to reorganization.

In conclusion, I desire to express hearty appreciation for the good counsels and consideration accorded me by the Executive Committee, Chairmen and members of Committees, Mr. Marshall and Mr. Herbert, and others at headquarters, and to Mr. Fowler, during my absence last winter.

The next item on the program is the appointment of the Nominating Committee to select the nominees. for the officers for the Section for the year begin

that Committee Mr. Fred Smith, New York Edison Company; Mr. S. J. Palmer, of the Public Service Company of Northern Illinois, Chicago, Illinois; Mr. J. F. Ford, of the Philadelphia Electric Company; Mr. J. G. Reese, of the Consolidated Gas, Electric Light and Power Company, Baltimore, Maryland; and Mr. B. P. Shearon, of the Northern Indiana Gas and Electric Company, Hammond, Indiana.

The next item of business is the report of the Committee on Classification of Accounts, Reports to Commissions and Relations with Other Associations, Mr. W. J. Meyers, Chairman, of the United Electric Light & Power Co., New York.

W. J. MEYERS: This report is very short and contains very little in addition to what you have already said, Mr. Chairman.

Report of Classification of Accounts, Report to Commissions and Relations

with Other Associations Committee

This Committee's efforts during the current year have practically been confined to work in connection with the revision and development of the N.E.L.A. standard classification of accounts. Most of this work has been done in conjunction with the corresponding committees of the American Gas Association and the National Association of Railway and Utilities Commissioners. Following the 1920 annual meeting of the Accounting Section, and pursuant to the action there taken, the Committee carefully considered the suggestions received from various sources looking to the further improvement of the tentative classification which had been distributed for the purpose of eliciting criticisms and suggestions, and in September last it spent several days in Chicago in joint conference with the committees above mentioned. At that conference most of the recommendations made by this Committee were accepted and embodied in a classification drafted by the committee of the Commissioners' Association. That report was submitted to that Association at its annual meeting held in Washington last November, and was approved by it and ordered distributed to the various state commissions, and was recommended by it for adoption by state commissions in the interest of uniformity. Consideration is now being given by several commissions to this classification.

While not all of the recommendations made by this Committee were accepted by the commissioners' committee, and while that committee insisted on embodying in its classification certain clauses in the nature of administrative regulations which in our opinion should not be included in a classification of accounts, the report of that committee was judged by this Committee to be as good as can be secured at the present time and a great improvement over the classifications now in effect in most of the states.

This Committee therefore recommended to the Executive Committee of the Accounting Section that, with the exception of the regulatory clauses, the draft be submitted to the Executive Committee of the N.E.L.A. as embodying the views of the Accounting Section insofar as it seems practicable to get them adopted at the present time by state commissions.

Because of the fact that when the N.E.L.A. 1914 Standard Classification of Accounts was adopted the provisions respecting contingencies and retirement of property had been drafted by the Public Policy Committee of the Association, and because provisions on these subjects in the classification framed by the commissioners' committee varied from those in the N.E.L.A. classification, it was deemed by the N.E.L.A. Executive Committee advisable to submit the present draft likewise to the Public Policy Committee for its consideration and recommendations. That Committee has recently given the subject very full and careful consideration and has added a few clauses designed to clarify the classification in certain important particulars; and with such additions and with the excision of the regulatory features before referred to, the Public Policy Committee approves the classification.

This Committee believes that the classification as thus amended is now ready for adoption as the N.E.L.A. Classification of Accounts, and it recommends that it have the approval of the Accounting Section and be ordered published. The Committee believes that the State Sections and Associations and Geographic Divisions should urge the commissions in their respective states to adopt the N.E.L.A. classification as the official classification for the purpose of reports to the commissions and for all other purposes related to public utility regulation and taxation.

This Committee in February held a meeting at N.E.L.A. headquarters for the purpose of considering the advisable course to pursue in connection with the revision of forms of annual reports to commissions. After a thorough discussion of the subject in all of its phases it was the unanimous opinion of the Committee that it is advisable to defer action

on this subject for the present and to concentrate efforts upon securing the adoption of the uniform classification of accounts, and the first step in securing its adoption by the state commissions seems to be its publication and distribution among the members of this Accounting Section as above recommended.

Respectfully submitted,

CLASSIFICATION OF ACCOUNTS, REPORTS TO COMMISSIONS, AND RELATIONS WITH OTHER ASSOCIATIONS COMMITTEE

HE ADDENBROOKE

HH CROWELL

HG KESSLER

WJ MEYERS, Chairman

JH LOBBAN, Vice-Chairman

OLIVER MCCORMICK

THE CHAIRMAN: Gentlemen, this report, though very brief, marks the completion of a long program of effort on the part of the Section, and if there is any discussion about it now we would like very much to hear it. I do not know whether the members have had an opportunity to examine this classification as printed, as it has only been in distribution. a very short time and there are only a few copies at the Convention, but Mr. Herbert of Headquarters tells me two copies have been sent to every member company throughout the country and they are probably in the hands of the member companies at this time. Is there any discussion on this interesting subject?

H. M. EDWARDS: This report of the Accounting Committee brings to a conclusion a long-continued effort, initiated in the first place by this Association, to bring about standardization of accounting methods and practices in the central station industry. It does not seem to me, therefore, that this opportunity should be allowed to go by without a thorough realization of what has been accomplished by this piece of work. The diversity in accounting methods which now exists between the various States is probably a natural result, considering the conditions under which State regulation has been accomplished, and yet, because of the fact that business methods and practices nationally are uniformly conducted and that the business itself is one which readily lends itself to standardization in the accounts, the hope has always existed that by some means uniformity in accounting methods could be brought about.

Looking for opportunities in this direction, we decided, and I think very wisely, that the best method of approach to the end we had in view, was through the agency of the National Association of Railway and Utilities Commissioners. This Association includes in its membership most, if not all, of the Public Service Commissioners of the entire country, and hence when that Association finally decided to appoint a Committee of its own members to study the subject and make recommendations to the Association, the way seemed to be provided. Conferences

JA ROCKWOOD

WILLIAM SCHMIDT, JR

E C SCOBELL

HE WEEKS

between the members of this National Association Committee and our own Accounting Committee have been going on for a year or more. The National Association has recently, as I believe all know, published its own system, and our system, the subject of this discussion, is practically in entire agreement with the National Association classification. Such differences as exist between the two classifications lie in the elimination in our classification of all matters of a regulatory nature. Ours is a classification of accounts purely and simply. It not only fits our business, but I should imagine that basically it is a better classification for individual State Commissions to adopt rather than the National classification because, containing no regulatory matter, it leaves a State Commission in a position to introduce such regulatory matter as the laws and conditions in the particular State require. Where, of course, the laws under which State Commissions are appointed have peculiar and local features, complete national uniformity cannot be realized. If, however, the individual State Commission were to adopt our classification as its standard and then should issue separate orders to carry out local conditions, standardization would be helped. Such method I believe to be the correct one, as I have never believed that regulation should be effected by means of the accounts.

Referring now particularly to our own classification, it is, in my opinion, sound, safe and sane. It is comprehensive in its scope, the definitions attached to the accounts are clearly expressed, and the notes appended to these definitions abound with illustrations. In fact, I believe that this classification represents the last word in accounting procedure, and I therefore unhesitatingly recommend that all member companies do their utmost to bring about its adoption. There is just one thing in the published classification to which I desire to call attention. The Balance Sheet Exhibit on page 3 includes, under the caption "Accrued Liabilities," Account 241, "Advances from Affiliated Companies." This is a printer's error, and Account 241 should appear on a line by itself.

THE CHAIRMAN: I notice Mr. John W. Lieb, of the New York Edison Company, who has been a long and consistent advocate of standardized accounts, has come in. I wonder whether he would care to say anything about this classification?

J. W. LIEB: Mr. Chairman, I doubt whether I can contribute anything of value to the discussion. Unfortunately, I did not hear Mr. Meyers' report, having been engaged in a committee meeting elsewhere. I would say, however, that such knowledge as I have of the standard system of accounts, coming not so much from an intimate study of the formulation as it is now presented to you, but rather from the general viewpoint of an executive, would seem to indicate that this formulation has required a good deal of give and take to conciliate practices under different systems of accounting and the requirements of the various regulatory bodies. You have before you what seems to be a fair and reasonable formulation that should meet all requirements, that represents a reasonable compromise that should enable any company to keep a careful track of its transactions, and to enable the accounting division of the company to submit to the management a statement of the financial status of the business, and the transactions that have occurred. Therefore, I think the accounting section is to be congratulated that it has brought this work up to the point where it now submits a definite formulation as the result of careful revision and extensive study, and I sincerely hope that it will receive proper recognition and appreciation.

FREDERICK SMITH: I would like to ask Mr. Meyers what the chief differences are between this classification of accounts and the classification adopted by the Association at the Philadelphia Convention?

MR. MEYERS: The principal difference is with respect to the matter of contingencies. The 1914 classification had an account for contingencies and for renewals of property. In our present classification, the one that has been worked out in conjunction with the National Association of Railway Commissioners, no provision has been made in operating expense for the item of contingencies. We discussed that subject, and provided a reserve account for contingencies to be made up from surplus. We found on the discussion of this matter of reserves built up from operating expenses that the Commissions claim a very much more stringent control over such reserves than where reserves are built up out of surplus. They admit if the reserve is built up solely from surplus it is beyond the Commission's control, while otherwise they consider it to be completely within their control. We thought it inadvisable to inject into operating expense any item which would lead to a contest with the Commissions as the word "contingencies" would probably do. That is the principal difference.

With respect to renewals and to retirements of property, we provided simply an account for retirements which should provide for nothing but the original cost of the property. Our opinion on this subject was that it should be based on the original cost of the property as nearly as can be ascertained. from the records. When renewals come in at larger cost, the cost of the new property should be charged directly to the capital account and the capital account cleared of the old property at the record cost. Those, as I recollect, are the two principal differences.

THE CHAIRMAN: Are there any other questions? Any further discussion on this interesting subject? Mr. Brundage, have you anything to say about it?

H. M. BRUNDAGE: While it is one of those subjects, Mr. Chairman, I can talk of at great length, I feel very much embarrassed, being a gas man surrounded by electric men, although, due to my activities, I have been a member of the N.E.L.A. a great many years. I was fortunate in that the Executive Committee of the American Gas Association

appointed me as one of the representatives to attend at the conferences held in Chicago during the year 1920. Mr. Edwards has spoken of these conferences and the work done, but he is a very modest fellow, you know, and he refrained from impressing upon you the days and hours and weeks of work we put in at the conferences, meeting representatives from commissions all over the country and the Association's representatives of the two industries, the American Gas and the N.E.L.A. I think when we got this system adopted we got something that substantially met the views of all present; some things not quite to my liking, and, as Mr. Edwards said, not to his liking, but, with such a combination of interests, to get them to agree on anything was a great big step in the right direction, and what was done has met the approval of the Executive Committee of the American Gas, and I am glad to see the same step being taken by the N.E.L.A.

THE CHAIRMAN: I do not want to close this discussion too suddenly. If anyone has anything in his system about classification of accounts, I would like to get it. We have a representative gathering here from the different companies throughout the country. Perhaps some of them, as Mr. Brundage says, are a little modest about getting on their feet. They do not have to be, because they are among friends. If there is no further discussion on this report, I will have to make an apology to Mr. Fred R. Jenkins, Chairman of the Co mittee on Accounting Education, who, through a tle perhaps pardonable nervousness I overlooked in the order of business. I will ask him now to make a report on his activities.

Report of Accounting Education Committee

The Accounting Education Committee during the past year has continued to conduct both the Elementary and Advanced Accounting Courses.

The Elementary Accounting Course was revised and readapted to best serve our purposes, principally to relieve the student of a considerable amount of the routine bookkeeping work, the benefits of which were not considered warranted by the time required.

This also would have the effect of a larger number of students completing the course, as it proved that many found it difficult to get sufficient time to carry on the large amount of bookkeeping required. in the early lessons.

The Committee has continued its work toward the completion of the Advanced Course in Electric Utility Accounting. Up to March 1, 1919, the Advanced Course had been completed to Lesson 13, and during the Association year of 1919 the Committee completed eleven additional lessons, Nos. 13 to 23 inclusive.

During the year 1920 the Committee completed in pamphlet form Lessons 24 to 30 inclusive, and also Lessons 32 and 34.

Lessons 31, 33, 35 and 36 have not come through from the Committee of Editors in manuscript form at the date of this report. This matter is being followed up by the Committee, and it is anticipated that the course will be complete in every particular by October 1, in readiness for those who desire the complete course at one time.

We have been able with few exceptions to keep ahead of the subscribers who are taking the course.

Subscriptions

Elementary Course

Up to March 1st of this year we have had a total of 1,217 subscribers to this course. During the past year there has been a falling off of subscriptions to this course. Of the above total the subscriptions this year were 115.

We have in stock fifty complete sets, and it will be necessary to reorder to anticipate requirements for the coming year.

Advanced Course

Up to March 1st of this year we have had a total of 213 subscribers to this course, with 101 subscriptions received since last report.

At the Pasadena Convention it was suggested that the price of the Advanced Course be reduced, anticipating by so doing a large increase in subscribers. After careful consideration your Committee recommended a reduction of the Advanced Course from $65 to $40.

Since this reduction in price we have received 93 subscriptions, which shows a healthy increase in subscribers, probably due largely to the reduced price.

Finances

As of March 1st the following statement shows the income and expense of both courses:

Elementary Course

Total Expense
Total Income

$13,449.61

15.115.88

Balance-Surplus

$1,666.27

Advanced Course

Total Expense
Total Income

$16,328.63

10,719.80

$5,608.83

Deficit

The above indicates a net loss on both courses of $3,942.56.

During 1918 the Association advanced through the Accounting Section $2,500 toward the cost of preparation of the Advanced Course.

For the twelve months to March 1st the Advanced Course shows an income of $4,058.90 and an expense of $4,239.44. This expense includes the printing of 500 copies of each of seven of the lessons previously mentioned, as well as other costs of preparation. Deducting the estimated amounts for preparation the conducting of the course for the past twelve months would show a surplus of approximately $2,000.

With the course fully completed, it is anticipated that with the support of the Association the deficit of approximately $4,000 can be wiped out in a reasonable time.

Publicity

The reduction in the subscription price of the Advanced Course received generous publicity in the Association Bulletin, as well as through the Educational Bulletin published jointly by this Committee and the corresponding committee of the Commercial Section.

The energies of the Managing Director along the lines of publicity have been confined during the past year more to direct selling campaigns in the member companies rather than through a general campaign of the Committee.

In all cases where some one in the member companies, either the Educational Director or the Chairman of Committee on Education for the Section or Division, has taken an active interest in promoting the courses by acquainting the membership with their value, we have received representative subscriptions.

This has been the result in the Consolidated Gas, Electric Light & Power Company of Baltimore, West Penn Power Company, East St. Louis Light & Power Company, Penn Central Light & Power Company, Brooklyn Edison Company, Common

wealth Edison Company, and Wisconsin Light, Heat & Power Company.

In the West Penn Power Company, Pittsburgh, Pa., this work was handled through the West Penn Section by Mr. A. N. Cartwright, Chairman of their Educational Committee, with excellent results. Through the work of this committee we received 63 Elementary Course subscriptions and 17 Advanced Course subscriptions, as well as a large number of subscribers to the Commercial Courses.

This would indicate that when our organization is completed and working under Division committees the results should be much more satisfactory and encouraging.

The Educational Bulletin has undoubtedly been the source of our best publicity, confined as it is to educational matters in the various companies with special advertising for the Educational Courses of the Association.

As in previous years we have continued supplying the companies and their representatives with advertising material, consisting of booklets on each course, posters for departmental use, as well as a sufficient quantity of pay envelope slips for their pay envelopes.

These pay envelope slips contain the offer of cooperation by the company to their employes by advancing the tuition fee, and permitting the employes to refund the money to the company on a monthly payment plan.

There are four different methods of cooperation offered, as follows:

No 1-The company advances the tuition fee, permitting the employe to repay the company on a monthly deferred payment plan, and refunds to the subscriber all the tuition fee upon satisfactory completion of the course while in their employ.

No. 2-Same as No. 1, with the exception that the company refunds one-half of tuition fee.

No. 3-Same as No. 1, with the exception that the company does not refund any of the tuition fee. No. 4 This plan provides for endorsement and the recommendation of the courses, but does not offer any advance of tuition fee or refund to the subscribers, but cooperates with the employes in the organization and conducting of classes as in the other plans.

Practically all of the companies ordering the pay envelope slips adopt either the first or second plan, as it is believed that the benefits to the company more than offset the refunds on the tuition fee, as well as having other beneficial effects, including labor turnover.

Owing to the late start the Chairman of this Committee is unable to report a full organization, but progress has been made along the lines of the new plan of organization, which, if completed and put into satisfactory operation, should result in fully

acquainting all member companies and their employes with the value of these courses.

Attention is particularly called to the fact that the work of the Education Accounting Committee is such that it does not readily conform to the Association year, inasmuch as its most important work should be taken up and carried on during the months of August and September, while in general most of the committees are not organized until later.

It is recommended that as far as possible the members of this Committee be held over from year to year, and in such cases where resignations are necessary that their places be immediately filled by some one who has shown a particular interest and apti

tude for this work.

In the Geographic Divisions, where the most effective work can be done, this Committee should be represented by a local Chairman who is in position to give sufficient time to the organization of a committee covering his Division, and who has the enthusiasm to carry on this work through his committee. throughout the entire year, particularly during the late summer months, at which time most of the companies are planning their educational activities for the coming winter.

Necessary changes in the Chairmanship of the Division Committee should be made promptly by the Section Chairman.

Following is the list of lesson subjects of the Elementary Course and Advanced Course, containing the revisions and changes to date.

The Elementary Course is a mercantile course covering the fundamentals of bookkeeping and accounting, and was specially selected as a preparatory course to the Advanced Course.

This course has been specially adapted for the use of the Association as a home-study course, with a view of giving the untrained man sufficient education to properly carry on the work of the Advanced Course.

Lesson 1-Fundamental Accounts, Classifying and Recording Transactions, Posting, Trial Balance.

Lesson 2 Single Proprietorship Accounting, Book of Account, Billing, Statement of the Business, January Transactions.

Lesson 3-Notes Receivable, Notes Payable, Furniture and Fixtures, Banking, February Transactions.

Lesson 4 Capital Accounts, Profits, Interest, March Transactions.

Lesson 5-Partnership Accounting, Accounts Required, Transactions.

Lesson 6-Transactions Completed, Procedure at close of Fiscal Period.

Lesson 7-Consignment Accounts, Controlling Accounts, Admitting a New Partner, Balance Sheets, Profit and Loss Statements, Ledger Closings, Analysis, Comparative Results.

The Advanced Course in Electric Utility Accounting, as will be seen by the following, is a highly specialized course prepared through a Committee of Editors by specialists on the subjects assigned to them :

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