Accounting for Transport Undertakings

In this article we will discuss about the accounting for transport undertakings.

Transport Companies are divided into:


(a) Railways,

(b) Trams and Buses,

(c) Roadways,

(d) Shipping and

(e) Airways.

(The first two items have already been dealt with under the head ‘Double Account’).


Transport Companies carry passengers, goods etc. from one place to another against a nominal fare which is collected either at point of boarding (e.g. station in railway) or on the way (e.g. collection by conductors in the buses/trams). But when goods are delivered, freights are collected either at the point of loading or at the point of unloading.

(a) Railways:

Generally, the station-master or booking clerk of each station prepare a statement showing the total number of tickets sold to different stations which must agree with the opening and closing balances of tickets. A summary is made at the end of each week with the total amount of sales so realised which will be forwarded to the Cashier of the respective divisions.

Therefore, the total collections are added up in order to ascertain the total for each division and zone. The divisional cashier deposits the total collections into the bank after proper verification and scrutiny.


Besides, railways may have other incomes also, e.g. receipts from advertisements. Care should be taken for purchases and issues for coal, petrol, diesel etc. Generation (for electricity) Account is separately to be prepared where the same is generated by the same concern in order to ascertain the real position. At the same time, account for lubricants, engineering goods, tyres etc. should be made separately.

The different sections for Wages and Establishments are separately made as Maintenance, Administration Operating Expenses etc. It should be remembered in this respect that proper distinction should be made between capital and revenue expenditure, i.e. purchase of coaches, vehicles, engines, trailers, etc.

Cost of overhead wiring and laying of lines etc. should be capitalised and normal repairs and development of the above including road taxes, licence, insurance etc. should be treated as revenue expenditure (through Operating Account). The major operating expenses of railways are: Operating staff remuneration, Lubricants, fuel (e.g. coal, diesel or electricity), Spare parts, Repairs of Rolling Stock to locomotives etc.

(b) Trams and Buses:


Tram and Bus companies maintain Traffic Book having the information from Conductors’ Way Bills. Generally, the conductors prepare an invoice (statement showing the total number of tickets issued and tickets sold against them, which will ultimately be handed over to the cashier who, after proper verification, deposits the cash into Bank.

Expenses of tramways are almost similar to the expenses of railways. But the major expenses of bus companies include Salary of Driver, Conductors and Cleaners; Fuel (i.e. Diesel and Petrol); Lubricants, Spare Parts and other maintenance materials; Government taxes etc.

In this respect, it should also be remembered that incomes and expenses of each vehicle are to be separately maintained so that exact profit or loss on sale of discarded vehicles can easily be known.

(c) Roadways:

When goods are booked for delivery from one place to another, the Road Transport Carrier issues a note, known as consignment note, to the consignor which will include the names and addresses of consignor and consignee, description of the goods, total number of packages including weights, freight and other charges payable etc.

The consignor forwards the note to the consignee by post who, after presenting the note to the carrier, will take delivery of the goods sent by the consignor. The carrier takes the payment at the time of issuing the note and such payment (which is made by the consignor) is known as ‘Freight Income’.

If the consignment note includes ‘To Pay’, it means freight will be paid by consignee after proper delivery at the destination. In this case, Sundry Debtors Account will be debited and Freight Income Account will be credited and when the freight is collected from the consignee, Cash Account will be debited and Sundry Debtors account will be credited.

When goods are booked and freight is paid by the consignor but the goods are lying in-transit, no such freight could be considered as income and an adjustment is to be made by debiting Freight Incomes Account and Crediting Prepaid Freight Account at the end of the year for such transactions.

All particulars relating to a Trip is written in a Log Book.

Its specimen is given below:

Specimen of a Daily Log Book

(d) Shipping:

Generally, the agents of the ship issue a ‘Bill of Lading’ for goods received for carrying. It may be either paid or ‘To Pay’ (i.e. at the destination). In case of former, all ‘Bills of Lading’ which are paid should be transferred to Income Account and, in case of the latter, the income will be credited and agents’ account will be debited (of course, no claims for freight can be made if the goods are lost-in-transit or the goods do not reach the destination in case of ‘To Pay’ Bills of Lading.)

Thereafter, the agent will send a statement of collection every month made by him against ‘To Pay’ Bills of Lading. But an Income Account is to be prepared for each voyage and each route and ship for ascertaining the individual earnings.

Besides, the shipping companies maintain Passage Book and Freight Book from the returns of the captain. Again, the freight may be from regular source or on being chartered. Where the ship is chartered, the ‘Charter Party’ will reveal everything including the chartering of the ship and the freight so payable.

The navigation expenses include cost of fuel (i.e. coal or diesel), Salaries and wages of crews, cost of Lubricants (bunkering expenses and) other ships stores, cost of pilotage and other harbour charges, various marine dues, insurance of different types, commission, brokerage, general average claims, etc.

It will be better if separate ledger is maintained for each ship and all expenses and incomes relating to each voyage. The incomes and expenditures against each voyage is to be recorded in a voyage account.

(e) Airlines:

Generally, air tickets are sold at different places daily along with their serial number in the following manner:

(i) Where tickets are sold by Sales Agent:

The sales agents prepare daily sales report and the money so realised/collected is deposited into bank.

(ii) Where tickets are sold by Travel Agents:

In this case, the travel agent submits a weekly/fortnightly/monthly statement of sales and deposits the money (Cash or Cheque) into the bank after deducting his commission together with the Sales Statement.

(iii) Where tickets are sold on credit to Approved Clients:

For this purpose, Sundry Debtors Account is debited and Income Account is credited. This is done with the help of credit sales bill registering the daily sales statement. At the same time, a remark is made against the particular tickets for credit sales along with the corresponding bill number so that, in future, there will be no difficulty for the same.

It has already been stated above that air tickets are sold at different destinations for different dates. Therefore, an Income Suspense Account/Unearned Income Account is credited for the amount of daily sales so made.

Normally, a manifest is prepared for actual tickets utilised showing the detailed particulars about the passengers and their numbers. The value of total tickets utilised is taken to Income Earned Account by debiting Income Suspense Account/Unearned Income Account which has been credited with the total amount of tickets sold. The balance of Income Suspense Account/Unearned Income Account will reveal the tickets sold but not utilised.

The major expenses of airlines include:

Salaries and Allowances of crews, Fuel (i.e. Kerosene and Aviation petrol), Lubricants, Repair Expenses, Spare parts and other maintenance materials, Taxes and fees for landing etc.

Airways Bills either ‘Paid’ or ‘To pay Charge Collect’ are issued by airlines for goods booked and the amount so collected in this regard is taken to Prepaid Freight Income Account.

Prepaid Freight Income Account is debited and Freight Income Account is credited for the amount of ‘Paid’ Airway Bills, if goods are actually transported according to manifest. But, Charge to Collect Account is debited and Freight Income Account is credited for ‘Charge Collect’ Airway Bills.

At the same time, when the statement is sent by the destination station about the ‘Charge to Collect’ airway bills, the concerned airlines station will be debited and ‘Charge to Collect’ account is credited. Sometimes, it may so happen that the consignee does not take delivery of the goods from the airlines in the case of ‘Charge Collect’ airway bills.

In that case, the latter (airlines) has got the right to sell those goods in auction in order to recoup the freight from the sale proceeds of those goods. But in case of international route, the first charge is made on goods for customs and, if there is any balance of the proceeds left, the same may be taken by the airlines and the deficiency, if any, is written-off as bad.

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