Utility Accounting and Financing

Any business endeavoring to succeed must be founded upon a sound financial basis, whether it is municipally or privately owned. The owners of a private utility are stockholders, and take profits on their investments through dividends. In the municipal utility the consumers, or tax-payers, are the stockholders, and do not directly receive dividends, but indirectly share in the profits, by being served free water for fire protection, street flushing, park sprinkling, etc. along with the rate adjustments, no tax levy, and other advantages. Adequate bookkeeping and accounting must prevail, in order to obtain efficient and accurate results. The first and most important division to consider is the "net income account/' which shows in detail the operating and non-operating revenue, and operating, maintenance, depreciation, sinking fund, and depreciation reserve expense. This makes known to the stockholders or consumers the net income and the sources and amount from which the income was derived and for what it was expended. It also reveals the proprietary increase for the year, and the amount available for betterments. This amount may be spent for new equipment and extensions, which are betterments, and increase the fixed assets of the utility. A statement exemplifying the additions and constructions, along with the sale of old equipment and depreciation reserve, enumerates the exact amount the plant has increased or decreased during the year. This difference added or subtracted from the value of the preceding year is the present valuation. The "balance sheet" is the most essential and interesting statement in any financial report, because from it you may visualize the assets you have, the liabilities you must meet and, most importantly of all, it enumerates the proprietary interest or what the public utility is worth to the city or corporation at the present time. Let us first consider the fixed assets and liabilities. These assets include the total value of land, buildings, distribution system, equipment, etc.