The role of accounting in public utility regulation is merely one aspect of the role of accounting in the broader field of economic control. Of course, the general development of accounting is a process of evolution which has gone on for many centuries whereas the use of accounts in public utility regulation is a matter of recent origin, as of July 1947. It is, in fact, considerably less than 100 years old. Nevertheless, the use of accounts as a tool of regulation is, in a sense, a forerunner of the current dominant trend in general accounting. The procedure in this article will be to consider first, public-utility regulation and some of the accounting problems associated with it. On the basis of that discussion the author shall turn to the broader problem of general economic control in the expectation that the broader view will help to appraise better the place of accounts in public utility regulation. The regulation of public utilities developed as a practical expedient designed to correct certain injustices and abuses which had arisen in the prevailing economic system of competitive control. From the start regulating commissions have been heavily dependent upon accounts.

The article discusses the basis for accounting principles. The concept of a government of law as contrasted with a government of men is one of the best expressions of the role of principles in human affairs. However, this familiar legal dictum refers to a highly specialized application of principles. It assumes a systematized body of law which applies only to those relations between human beings which are regulated by the authority of a politically organized society. At the back of any such system of law lie general principles which were formulated so early in the evolution of human society that we cannot determine their origins. These general conceptions or principles serve as standards for the judgment of human conduct. Some of them are justice, fairness, truth, kindness, friendliness and beauty. There are many of them. They are so general in character that they defy exact definition. Systems of law and types of government come and go; the things which men believe to be just and beautiful change, but these general conceptions persist from age to age.