Re: Dr Beeching

[jsr@bcs.org.uk (John S.Robinson)]

David H Wild <dhwild@argonet.co.uk> wrote:

>On the other hand, I don't think that the pre-grouping companies knew
>anything at all about the difference between expenditure and cost. You
>can't, for instance, set the price of a new locomotive against revenue in
>the year that it was bought - you have to write the cost down over a number
>of years. This was done, in part, but many of the costs were obscured in
>the overall accounts.

In the U.K at least this was partly due to our old bogeymen the
legislators. I am not an accountant, but AIUI standard railway
accounting (as required by law pre-19??) assumed that you raised
capital by various share calls and used it to build and equip your
railway. Once this was complete, all other expenditure (obviously
neglecting expansion) was a matter of replacement, and hence properly
charged against revenue. This was one explanation of the mysterious
"rebuilding" of locomotives in which little of the original survived.

In a large organisation, where replacement expenditure does not
fluctuate wildly from year to year, the result is probably more
transparent than using depreciation formulae which can be varied by
directors to make the bottom line suit their convenience. Most
businesses that go bankrupt do so from lack of hard cash, not
necessarily the same thing as losses on paper.

During and since the nationalized era there have been many pressures
in the opposite direction, to make mere equivalent replacement look
like "new" investment. Those who seek the truth are probably best
served by some middle course, but arguably the small investor, trader
or subsidiser was better served by the older fiction.

All this addresses the previous comment about the overall or published
accounts. I do not know if anyone has published any information on
what internal management accounts the old companies had. However, a
competent senior manager in a small to medium sized company could
probably tell a great deal from travelling around, keeping his eyes
open, quizzing those on the ground and poking his nose into secluded
offices and quiet corners. All techniques probably lost by modern
managers with an accountancy background.

Cheers,
John