A  liability  is  said  to  be  funded  when  a  fund  has  been  specifi-
cally created  for  its  liquidation.  Debt  is  said  to  be  funded
when  a  factor  of  permanence  has  been  attached  to  it  by  reason


26c   GOVERNMENT  ACCOUNTING  AND  REPORTING

of  a  long  term.  Thus  all  the  liabilities  of  a  government  are
funded;  current  liabilities  cannot  be  incurred  unless  funds
have  been  specifically  created  or  appropriated  for  the  liquida-
tion thereof;  permanent  or  fixed  liabilities,  such  as  long  term
debt  are  described  as  "funded"  by  a  special  application  of  that
term,  although  in  certain  cases  debt  of  this  class  comes  within
the  first  definition  of  a  funded  liability,  namely,  when  a  sink-
ing fund  has  been  established  to  liquidate  it.
In  the  balance  sheet  the  assets  of  sinking  funds  and  of  en-
dowment funds  are  excluded,  being  shown  in  separate  state-
ments ;  fixed  properties  and  long  term  bonded  indebtedness
are  also  excluded.  The  result  is  that  only  the  assets  that  rep-
resent the  resources  of  expendable  funds  remain,  against  which
are  shown  the  liabilities  to  be  liquidated  therewith,  resulting
in  a  surplus  balance  consisting  of  "the  excess  of  expendable
funded  assets  over  funded  liabilities  except  long  term  bonded
debt."

The  surplus  balance  in  the  balance  sheet  is  derived  from  the
surplus  account  of  the  proprietary  group  of  accounts.     The
surplus  account  of  the  proprietary  group  consists  of  the  fol-
lowing classes  of  debits  and  credits :
Debits :

i.     The  amount  of  uncollectible  taxes  written  off.
2.  The  amount  of  uncollectible  accounts  receivable  written

off.
3.  Adjustments  of  reserves.
4.  Refunds  of  revenues  of  prior  years.
5.  The  total  expenditures  for  the  year.
6.  Losses  on  stores  inventories  applicable  to  prior  periods.
Credits :

1.  The  amounts  of  taxes  recovered   which  have   pre-

viously been  written  off.
