1976-1977 — Page 29

Notes on the Operating and

Profit & Loss Accounts

The Kowloon-Canton Railway is owned by the Hong Kong Government whose policy is to avoid cash transactions between its departments. However, the Railway prepares its annual accounts based on commercial principles for the determination of its profitability and as a reflection of the performance of management. In these circumstances the market value of all services rendered to Government departments, the renting to them of railway property and the loss of revenue caused by Government action are included in such accounts. A principal item is the considerable difference between actual income derived from the sale of tickets to students and the amount which they would have paid if normal fares were charged and is in effect a sub- sidy to students. The situation is the same as in the case of the bus and tramways companies which are compensated for the concessionary fares charged to students by the payment by Government.

In order that the Railway accounts can reflect income which is part of the normal revenue of non-government owned railways the following notional credits were included in these accounts :

Subsidy for Scholar Tickets

Value of tickets issued free of charge to Government employees travelling on duty

Conveyance of mail to China

Rent for Railway land occupied by Government departments

$

3,352,670

392,199

1,339,215

127,978

5,212,062

Conversely, notional debits shown Contribution in lieu of rate

Contribution in lieu of duty on diesel oil used in locomotives

Annual rent charge for use of Government land

Postage through 0.H.M.S.

in the accounts consisted of :

$ 629,208

$ 912,651

$ 820,000

$

1,652

$2,363,511

Furthermore, the salaries of staff include an element for the

cost of fringe benefits, such as pensions etc.