ACCOUNTANCY ESTIMATES OF THE BRIGHTON TRANSPORT BOARD
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The Brighton Borough Accountant Calculates What Past Profits Have Been, in Terms of the New Arrangement IN connection with the joint-transportboard scheme for Brighton, Hove and district, the Brighton town clerk has submitted a letter from the borough accountant answering the question as to whether the profits of Thomas Tilling, Ltd., during the past three years, on the Brighton and local routes, have been as much as the amount which that concern would draw from the new board if the total profits of the board were i78,000.
In addition to answering this question, the borough accountant deals with a second one which appears pertinent, namely, the question whether, if appropriate adjustments be made in the accounts of the tramways undertaking and Thomas Tilling, Ltd.;'in accordance with the provisions of the Bill, the combined profit has been 178,000.
Before answering the first question, the letter states, adjustments have to be made in order to obtain a proper comparison. The Bill provides for a maximum yearly depreciation of 20 per cent. of the original cost of the vehicles. "I have written back the depreciation the Tilling concern charged," the accountant writes, "and substituted the equivalent of 20 per cent. I think this results in providing too much for depreciation, but I must use this measure."
The payments to Brighton and Hove for running rights would cease, as also would the proportion of head office expenses and directors' fees. On the other hand, an estimated amount for staff performing duties for the board (equivalent to those undertaken by the head office of Thomas Tilling, Ltd.) must be charged to the accounts.
The accountant reports having seen the private ledger of Thomas Tilling, Ltd., and obtained a certificate from the auditors of the net trading profits, which figures form the starting point. The answer to the first question is that the adjusted profits have been at least as much for the past three years as the sum Thomas Tilling, Ltd., would receive if the total profits were 178,000. In the answers to both questions the profit figures are those before payment of income tax, which, it is incidentally pointed out, is an appropriation of profit and not a charge against profit.
The position of the corporation should be that, having received so much taxed income, it is available as "set-off," the corporation retaining an equivalent
amount of tax deducted from the interest on the tramway loans and, subsequently, when these loans fall in, from rate-fund interest. Of course, if there should be a surplus,: set-off" it would mean that the corporation would bear the tax or part of it after the tramway loans had been repaid, but the accountant thinks, with expenditures on sea-front improvements, housing and education, the corporation should be able to absorb the " set-off " available.
The merger does not affect the corporation's position as to "set-off."
In order to answer the second question one must try to forecast how the board would deal with the tramway accounts. Large sums have been charged to revenue for track renewals, but in future there will most probably be less chargeable to revenue for this purpose. The money from Hove Corporation, if the balance were merely invested, will, it is estimated, earn 5 per cent. Then there will be an additional route from which a profit can reasonably be expected.
The accountant has allowed for depre ciation of the tramways in accordance with the provisions of the Bill and has assumed the fares (bus and tram) charged to be the same as they are at present. Taking the figures for the three years to March 31st, 1930 (Tilling figures to December 31st, 1929), and making adjustments to fit the altered circumstances, the average profit would be more than 178,000, the amount for the past two years being well over that sum.