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relations. Even if their decisions be made in good faith, the conflict of interests gives a partisan character to the whole affair. 'In this respect, preferred stock, even when non-cumulative, has a decided advantage over income bonds. The preferred stockholders have a direct voice, and sometimes a disproportionately large one, in the choice of directors. The question of income is determined by the representatives of different sides, and not in an ex-parte council.

So great are the possibilities of trouble of this kind that a voting trust like that of the Atchison is the almost necessary correlative of a large issue of income bonds, unless the security is to become a wholly speculative one. If the income bondholders are not to have any share in the determination of the affairs of the road, they must, at least, know who is to decide matters for them. To give stockholders control and leave the income bondholders none at all is to put the power out of the hands of those who are most affected by its exercise. The income bondholders are just on the margin, where a slight change of policy in making up accounts will give them full interest or nothing at all. In this view the value of their secureties is perhaps more affected by the action of the directors than that of the stock itself. To burden them with all this liability and give them no assurance as to the character of the management is contrary to the most fundamental principles of the public policy.

The more complicated the questions decided, the worse the case becomes. The combination of a coal business with that of a railroad company makes the position of the income bondholders more precarious because it increases the opportunity for variations of judgment on the part of both managers and outsiders. It is perfectly conceivable that in a system like the Reading, the authorities themselves should have had a somewhat mistaken impression of the actual state of affairs. But any such misjudgment was productive of such bad results, and furnished so many opportunities for speculative changes in value, that the sufferers can hardly be blamed if they put a worse construction on some matters then the facts themselves fully warrant. The system itself is at fault.

Accounting for Interest on Bonds-How Coupons Should be Treated When Paid-How Filed.

The method of accounting for interest payments on registered bonds is very simple compared with the methods devised for recording the payment of interest on coupon bonds.

In the former case the financial officer makes a certified statement of his disbursements for this purpose, and the accounting officer, after satisfying himself as to the authenticity of the same, allows the necessary credit.

While there are numerous methods of accounting for coupons redeemed, the following may safely be observed:

When a coupon is paid, the officer paying it should cancel it by punching it at least twice; this will prevent the possibility of its reappearance upon the street.

As a rule coupons reach a company through the various local banks and collecting agencies. All the coupons presented by each party or agent should, after cancellation, be enclosed in a separate envelope, and upon the face of this envelope should be written the name of the payee, the date of payment, the names of the mortgages from which the coupons have been detached, the number of coupons presented for each mortgage, the gross amount of such coupons, and, finally, the total amount paid. A history of each transaction will thus be preserved temporarily in its entirety for reference. This information, as may readily be supposed, will be invaluable afterwards in adjusting accounts, verifying payments and satisfying inquiries.

After payment is made, all the envelopes containing coupons, together with a detailed statement of the same, should be turned over to the accounting officer for examination and record. Upon their receipt the latter officer should proceed to verify the contents of the different packages and satisfy himself of the correctness of the accompanying statement in which the aggregate payment is given. The foregoing facts being determined, he should file away the various coupons received. A good plan for this is as follows: A record book is provided for the coupons of each class of bonds; the filing upon the back of the book specifies the name of the mortgage; the first page corresponds to bond number one, and so on through the book. The amount of the bond is specified at the head of the page. Each page is divided into as many squares, or blanks, as there are coupons attached to the bond; the blanks also correspond in size to the coupons. Each blank space on the page is numbered, and if the bond has fifty years to run and the interest upon it is payable semi-annually, there are one hundred blanks provided -two for each year. The coupon maturing first is pasted in blank number one, the second in blank number two, and so on. The blanks in the book that are unoccupied, represent at a glance the coupons that are outstanding. The aggregate of the outstanding coupons is the amount of the company's liability for unpaid interest on its past due cou

pons. It is thus not only easy to ascertain precisely the aggregate liability, but it can also be determined readily for the different classes of coupons.

The plan is simple, economical and effective. The financial officer delivers up the cancelled coupons before receiving credit for their payment. After his accounts are verified, the cancelled coupons are pasted in the book by the accounting officer, in the manner described, and in such form and with such system that reference can be made in an instant to any particular coupon that has been paid.

Under this method of accounting any attempt to foist a spurious coupon upon a company could not possibly remain undetected, no matter how perfect the counterfeit might be, for the reason that when the time came for filing it away, the person performing this duty world find the place allotted to that particular coupon already filled; or, if the spurious coupon were paid before the genuine, then it would occupy the place of the latter in the file. In either case the counterfeit would be quickly detected.

The foregoing method of accounting for paid coupons affords, in the multitude of checks it enforces and suggests, the maximum amount of security attainable at the least possible cost.

There should be no connection between the person who pays the coupon and the person who audits the account of the payer and pastes the coupon in the record. The person who draws off the balance sheet of outstanding (overdue) coupons and balances it with the company's books, so incidentally verifies the accuracy of the statement, 'that every coupon claimed to have been paid, has actually been paid.

Sinking Fund Accounts.

In the first place, specific accounts should be opened on the general books of a company with each particular sinking fund, and to such accounts should be charged or credited, as circumstances require, each particular installment.

In order that the exhibits of a company may show a full and clear record of the sinking funds, the following rules are suggested:

When sinking fund installments are charged against revenue they should be embraced in income account in the month in which they accrue without reference to when they are paid, and such amounts should be carried on the credit side of the balance sheet under the head of "Accruing Sinking Fund Installments." This item will, of course, disappear when the installments are paid.

The amounts so paid should be shown on the balance shee、 as an asset under the head of "Amount deposited with trustee of sinking fund," and on the opposite of the balance sheet an account should be opened with "Sinking fund installments paid;" the former account representing the amount of cash or bonds, as the case may be, in the hands of the trustee, and the latter the amount of income used for paying such sinking fund installments.

When sinking fund installments are not charged against revenue, the aggregate amount of the sinking fund will appear on the credit of the balance sheet under the head of "Past due sinking fund installments;" on the opposite side of the balance sheet an account should be opened to be known as "Unpaid sinking fund installments.' Both of these items will disappear with the payment of the sinking fund, and the amount so paid will appear upon the debit side of the balance sheet as an asset under the head of "Amount deposited with trustee of sinking fund."

When bonds that are paid into a sinking fund, or bonds of a company owning the sinking fund which are purchased with cash payments to said fund, remain uncancelled, such bonds should appear upon the credit side of the books and in the accounts as "Live bonds in the hands of trustee of sinking fund;" these latter should, of course, be withdrawn on the books and in the exhibits from bonds outstanding.

When bonds paid into the sinking fund, or bonds of a company owning the sinking fund which were purchased by the trustee with cash payments to such fund, are cancelled, the outstanding bonds should be reduced upon the books and in the accounts by a corresponding amount, and no cancelled bond, whether in the sinking fund or elsewhere, should be embraced as an asset or liability upon the books or in the accounts.

When it is desired to recapitalize bonds that have been purchased for the sinking fund and cancelled, the progress, so far as the accounts are concerned, should be the same as when the securities were first issued, viz., the amount of the bonds or stocks issued should be credited as outstanding, cash being charged with the proceeds of same.

When bonds paid to satisfy sinking fund requirements, or bonds purchased with cash payments to said sinking fund, remain uncancelled and continue to draw interest, the trustee should be charged with all such interest received under the head of "Trustee of sinking fund account accretions from investment of installments;" and on the opposite side of the balance sheet an account should be opened to be known as "Accretions from investment of sinking fund installments."

When sinking funds are paid in cash or uncancelled bonds, the amount of such cash or bonds appears, as described above, as a debit until the obligation for which the sinking fund is credited is finally retired. When this event transpires, the accounts "Amount deposited with trustee of sinking fund," and "Trustee of sinking fund account accretions from investment of installments" should be credited, and "Live bonds in hands of trustee of sinking fund" charged with that portion of the sinking fund represented by bonds of the issue for the benefit of which the sinking fund was created which the trustee cancels and returns the company.

The balance of the sinking fund, if any, represented by bonds of other classes or cash, or both, as the case may be, being returned to the company by the trustee, should be added to its assets, the amount being credited in the same manner as stated above for cancelled bonds returned by the trustee, i. e., to the accounts "Amounts deposited with trustee of sinking fund" and "Trustee of sinking fund account accretions from investments on installments."

In the event the payments made to the sinking fund were charged to income, the amount of same, together with all accretions from their investment, should be transferred back to income account from "Sinking fund installments paid" and "Accretions from investment of sinking fund installments," respectively. These entries close the differ

ent accounts

By accounting for sinking funds as described the exhibits of a company will always show at a glance the amount of all funds in the hands of the trustee belonging to the sinking fund; how much of same represents respectively payments made to the fund and accretions to it from investment of such payments; and also what amount of payments, if any, were charged against income.

Voting Trusts-Corporations.

The voting trust of the Atchison Railway Company seems to be one of those rare cases where two wrongs make a right. A trust, in this sense of the word, is an arrangement by which the stockholders part with their voting power for a term of years, and during that time lose all control over the management. The object of such a scheme is to protect each individual investor from the effect of changes of policy which might arise if a majority interest in the stock should change hands. In an ordinary corporation this is an ever present possibility. But if the stock, or a majority of such stock, is placed in the hands of

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