trust funds for governmental uses.

Governmental reserves.-The governments of states and municipalities have no capital stock as have private corporations, and hence no surplus. The amounts of revenue accumulations held for future expenditures, or employed for the acquisition or construction of the more permanent public improvements, or for the purpose of investment, must from one point of view be considered as an undivided whole; and yet these revenue accumulations may have been set aside or designated for specified governmental purposes by the terms of donations or of grants from other civil divisions, or by conditions stated in general or special appropriation acts. While in origin these reservations differ somewhat from those of private enterprises, they are, from the standpoint of the accountant, analogous, and therefore can with propriety be given similar designations to those applied to reservations of corporate surplus. Accordingly they are here spoken of as "governmental reserves," or simply as "reserves."

Governmental reserves, like the surplus reserves of private enterprises, receive designations and are classified primarily with reference to the object or purpose for which they are reserved, or the conditions. under which certain funds are received and are held. The only reservations that are usually recorded in governmental transactions are, however, those shown in the accounts of governmental funds-general, special, and trust. These reserves, like the surplus reserves of private corporations for gain, are of two distinct classes, those which are here called permanent and temporary.

Permanent governmental reserves are those recorded in governmental accounts with revenue accumulations which represent the principal of special or trust funds that has been received with the understanding or obligation that such principal must be kept intact forever, and only its income expended for general or special governmental purposes.

Temporary governmental reserves are those recorded in governmental accounts with revenue accumulations which represent that portion of general, special, and trust funds that is at once available for meeting current expenses and has, by the terms of general and special appropriation acts, been reserved for specified expenditures. The reserves of the general funds are those represented by the credit balances that record the provisions and limitations of the general appropriation acts, while the reserves of the special and trust funds are those representing the limitations and conditions imposed by the terms of special appropriation acts, such as those accompanying bond issues and those representing the limitations and conditions surround

Most American governments, in accounts with their properties and public improvements, have but one account for the interests or equities of the cities in such properties and public improvements, and that is an account recording a summary of the amount of such equities. A few cities, introducing improved accounts in the last few years, have separated those equities or interests into two groups corresponding to the reserved and unreserved revenue accumulations of the governmental funds. The interests in these properties, etc., corresponding to the reserved revenue accumulation of the governmental funds, are those which represent the gifts or other voluntary contributions which the government has received and has expended in the acquisition or construction of its properties and public improvements as called for by the terms of the givers. These governmental reserves may all be called permanent, and will in accounts be shown in detail under specified heads disclosing the purposes to which the money or other wealth received has been devoted.

EXPENSES, INTEREST, OUTLAYS, AND REVENUES.

Expenses. In governmental accounting, expenses are (1) the accrued costs, paid or payable, of services, rents, and materials, exclusive of those for permanent properties and improvements, utilized by nations, states, and municipalities for the maintenance and operation of their governments and for the conduct of their business undertakings for which they have constitutional or statutory authority; and (2) the losses by depreciation of permanent properties and otherwise. Expenses are the costs and losses for which no permanent or subsequently convertible value is received or receivable.

The expenses of governments may be classified in many ways. Classified with reference to the objects for which they are incurred they are readily arranged under the heads of "salaries and wages," "rents," "materials," and "depreciation," all of which classes may be subdivided into a large number of minor groups, to which may be given specific names, as in the case of the expenses of private concerns. Governmental expenses are further separable into two principal groups, here called general expenses and commercial expenses.

General expenses.-The general expenses of the governments of nations, states, and municipalities are those incurred by them in connection with the exercise of their general governmental functions. These expenses are, by the Bureau of the Census, subdivided into eight principal groups, corresponding to the following division of governmental activities: I. General government; II. Protection of life and property; III. Health conservation and sanitation; IV. Highways;

V. Charities and corrections; VI. Education; VII. Recreation; VIII. Miscellaneous. The expenses included in each of these subdivisions are further classified by the offices, departments, or otherwise, into a number of groups, fully illustrated by the tables of this report.

Commercial expenses.-The commercial expenses of the governments of nations, states, and municipalities are those incurred by them in connection with commercial functions. They are divided into four groups, corresponding to the subdivisions of commercial transactions, as follows:

(1) Expenses of municipal service enterprises are the total costs of the operation and maintenance of municipal service enterprises, or the expenses of those departments or offices of a city which are organized mainly for the purpose of furnishing the city with some public utility or with some service which most cities obtain from or through private enterprises.

(2) Expenses of public service enterprises are the total costs of operation and maintenance of the public service enterprises of a nation, state, or municipality, or the expenses of those departments or offices of a city which are organized for the purpose of providing the public, or the public and the city, with some public utility or service.

(3) Investment expenses are the total costs of the administration of sinking, investment, and public trust funds of nations, states, or municipalities.

(4) Special service expenses are the expenses incurred by nations, states, and municipalities in connection with special services performed or provided by any of their departments or offices other than the public service and municipal service enterprises.

Interest. In governmental accounting, the term interest is used as the designation of the accrued costs, paid or payable, incurred by nations, states, and municipalities for the use of credit capital utilized by them. These costs are separable into a number of groups, according as they are classified with reference to the purpose for which the credit capital was utilized, or according to the character of the governmental obligations evidencing the indebtedness on which the interest is payable.

Outlays. In governmental accounting, outlays are the accrued costs, paid or payable, of lands and other properties more or less permanent in character, and thus available for more than a single use, which are owned or used by nations, states, and municipalities in the exercise of their governmental functions or in connection with the business undertakings conducted by them. The outlays of governments are separable into the same groups as are their general expenses and the expenses of public utility enterprises.

Investments. For a statement of the nature of investments see a former page under "invested assets."

Storehouse supplies.-Under the designation "storehouse supplies" are included all costs, paid or payable, of supplies purchased by governments in bulk for cities, which are to be distributed or assigned upon requisition to the departments, or are to be applied to current uses or to the construction of public improvements. They are acquired under conditions. which preclude the assignment of their costs at the time of purchase to the purposes for which they are finally applied. In practice, these costs are referred to under a number of more specific designations.

Revenue charges and revenue deductions. In private corporation accounting many business men and accountants employ the terms "revenue charges" and 'revenue deductions" in referring to all costs and losses that must be met from or charged to revenue, in order to ascertain the income or net profits accruing from the management of the enterprise as compensation in the form of dividends or otherwise for the corporate capital or capital of the proprietor employed therein. The costs and losses of private business thus chargeable to or to be deducted from revenue are those here called expenses and interest. In accounting for governmental service or municipal service enterprises, where such accounting is made on the basis of securing comparability with corresponding private enterprises, the terms "revenue charges" and "revenue deductions" have the same significance as stated above. In accounting for the governments of nations, states, and municipalities, it is to be noted that all the costs and losses referred to above as expenses, interest, outlays, investments, and storehouse supplies, are in one sense charges against revenue, since they are met from accumulations of past revenues or present revenues, or from future revenues by anticipation. The costs and losses included under expenses, interest, and outlays are the current costs of government, and may with propriety be included under the designation current revenue charges or current revenue deductions.

Revenue expenditures.-The term revenue expenditures is by many public and private accountants employed with the significance given above to revenue charges and revenue deductions, and the word "expenditures" is also employed as a general descriptive term, including all that is signified by the words expenses, interest, outlays, investments, storehouse supplies, disbursements, and payments. It is sometimes employed in the present report with the general significance last referred to.

Revenues in private corporate business.-In private corporate business the word revenues is the designation most frequently employed at the present time in referring to amounts of money, or money's worth, which corporations and enterprises, other than those engaged in trade, receive or become lawfully entitled to receive as the result of business transactions, the

sale of property, or the rendering of services, and as returns upon property or interests in property. Many accountants use the word income with the significance here assigned to the word revenues, but the word revenues is at the present time employed by the larger number of accountants, many of whom employ the word income in referring to the excess of revenues over expenses.

Governmental revenues.-The revenues of nations, states, and municipalities are the amounts of money, or money's worth, provided or obtained by them for meeting those costs of government called expenses, interest, and outlays, and are derived from the following sources: (1) From the exercise of the governmental powers of taxation and police control; (2) from the receipt of donations, gifts, grants, and subventions for governmental uses; (3) from the performance of services for compensation, and the furnishing of material objects for valuable considerations; and (4) from the operation or management of the productive enterprises, investments, and properties of the government.

The revenues or revenue of a fiscal year are the amounts of revenues or revenue which have been provided or obtained, or made applicable, for that year. To distinguish between the revenues, or revenue, received and those receivable to the credit of a given fiscal year, the former may be called realized and the latter authorized but unrealized. Classified with reference to their character, the revenues or revenue of nations, states, and municipalities are, like governmental expenses, readily separable into two classes, called respectively by the Bureau of the Census general and commercial revenues or revenue.

The general revenues, or the general revenue, of a nation, state, or municipality are the amounts of wealth unconditioned upon the performance of any specific service to the individual contributor, provided or obtained as the compulsory or voluntary contributions of private individuals, corporations, or other civil divisions, for defraying the general costs of government. The greater portion of these revenues are derived from taxes; the remainder are obtained from fines and forfeits, gifts, donations, grants, and subventions.

The commercial revenues, or revenue, of a nation, state, or municipality are the compulsory or voluntary contributions of private individuals and corporations levied and collected as compensation for services rendered, material objects furnished, assumed special benefits conferred upon those from whom such revenues or revenue are obtained. Included in commercial revenues are those properly called, or here designated, special assessments, privileges, fees, charges, and sales, and those which are secured by the management or operation of productive governmental enterprises, investments, and properties.

Taxes. Taxes are compulsory contributions of wealth levied, or levied and collected, in the general interest of the community, from individuals and corporations without reference to special benefits which the individual contributors may derive from the public purposes for which the revenue is required or to which it is applied.

Property taxes, which constitute the most important single source of American municipal revenues, are direct taxes upon property or upon persons, natural or corporate, in proportion to their property. Property taxes are, by the Bureau of the Census, divided into two subclasses designated, respectively, general and special property taxes.

General property taxes are those direct taxes which are assessed and collected by methods practically identical for all kinds of property, while special property taxes are those which are assessed and collected upon specified property by methods not applied to the assessment and collection of taxes upon property in general. All general and most special property taxes are apportioned according to the value of the property subject thereto, and so far as they are thus apportioned are properly spoken of as ad valorem taxes.

General property taxes levied at the same rates upon all property within the territory of the taxing power are here called general levies of the general property tax. Similar taxes levied upon the property of specified portions of the territory of the taxing power, or at varying rates in different parts of that territory, are here called local levies of the general property tax. Both general and local levies may be for a variety of objects and may be authorized by any civil division, and all may receive specific designations according to the object or purpose of the tax, and the civil divisions whose revenue they constitute.

Business taxes are taxes collected from persons, natural or corporate, by reason of their business, where such collection is not associated with the granting of a license or permit to carry on such business.

Licenses or permit taxes are taxes collected from persons, natural or corporate, by reason of their business, where such collection is associated with the granting of a license or permit to carry on such business, or where without such license or permit the individual or corporation has no legal right to engage in the business.

Poll taxes (also called capitation taxes) are taxes assessed upon persons without regard to their property. They may be levied uniformly upon all males of specified ages, or graded according to occupation, or otherwise. Some of them are levied in specified amounts against all persons subject thereto, and others are quasi property taxes based upon an arbitrary valuation of polls. Poll taxes graded according to occu pation may also be called occupation taxes.

Fines and forfeits are amounts accruing to the benefit of nations. states, and municipalities as part of the punishment of individuals and corporations for failure to observe civil or criminal laws, or to perform the terms of specified agreements.

Gifts and donations are designations for amounts of voluntary contributions received by governments from private individuals, while grants and subventions are the terms generally applied in speaking of amounts received by one government from another. Amounts received as above, from private individuals or from governments, may be accepted either with or without specified conditions as to their use or investment.

Special assessments, like taxes, are compulsory contributions levied under the taxing or police power of nations, states, and municipalities to defray the costs of specified public improvements or public services undertaken primarily in the interest of the public. They differ from taxes in that they are apportioned according to the assumed benefits to the individuals or corporations for whom the services are performed, or according to the assumed increase in the value of the property affected by the improvement. They are, by reason of the difference here stated, classified as commercial rather than as general revenues.

Privileges. The designation privileges is applied (1) to the special contract rights, in and upon highways, granted by special or general laws and ordinances to specified individuals and corporations; and (2) to the amounts that are paid or payable to the general treasury as compensation for such rights. The rights which are enjoyed are of the same legal nature as those which in private business are called "easements." These privileges are, by the Bureau of the Census, divided into two classes called, respectively, major and minor. The major privileges are those which are exclusively enjoyed by public service corporations, and which such corporations must possess in order to carry on their operations; while the minor privileges are those granted to public service and other corporations and to private individuals for the privilege of utilizing for business purposes specified portions of the street or sidewalk, or the spaces above or below the same. It should, however, be noted that revenues derived from minor privileges granted in connection with the management of municipal markets, and the regulation of market sales of merchandise by its producers in the streets, are in all cases to be considered as parts of the revenues of markets.

Fees and charges.-Fees and charges, as distinguished from taxes, are compulsory contributions of wealth which are exacted from persons, natural or corporate, to defray a part or all of the costs involved in some specified service rendered by the government.

Fees are amounts of money paid or payable for services which are never performed except by govern

ments; while charges are amounts of money paid or payable for services performed by governments which are similar in character to those performed by one individual for another. The greater portion of all "fees" are receipts for services where the costs of the same are so well known that they are established by statute and are generally collected in advance; while "charges" can be definitely determined only upon completion of the work, and advance payments are only to guarantee the payment of costs when deter

mined.

Governmental revenues obtained or secured from the operation of productive enterprises, investments, and properties include rents, interest, receipts from sales of manufactured products, etc., the same as in private business management. The classification of such revenues and the terminology thereof are identical with those employed in connection with the revenues from similar sources of private productive enterprises, investments, and properties.

Revenue. The revenue of a nation, state, or municipality is the aggregate amount of money or other form of wealth provided or obtained by it for the objects and from the sources previously mentioned under governmental revenues."

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The word "revenue" is also used as a part of many compound terms, such as "revenue expenditures," "revenue loans," "revenue tariff," "revenue law,"

revenue producing law," "revenue account," etc., in most of which it retains its significance as here defined. For other legal and accounting terms in which the word "revenue" is employed with a different meaning, substitutes should be adopted in order to avoid complexity and to obtain simplicity of terminology and clearness of statement.

A revenue law is a law made either for the direct or the avowed purpose of creating or procuring revenue for the support and use of the government, while a revenue producing law is one from the operation of which revenue accrues to the benefit of the government.

A revenue account is an account showing the source, amount, and disposition of moneys received from revenue. All revenue accounts are treasury accounts, the latter term being a common or generic designation of all accounts showing the amounts of money received into the treasury from specified sources, and the disposition of the same. All moneys so received are spoken of as public moneys, or public funds.

PAYMENTS AND RECEIPTS.

Payments. In accounting, payments are primarily amounts of money, or its equivalent, delivered or disbursed in financial transactions either in the interest of or for the satisfaction of claims against the payer. Receipts. In accounting, receipts are primarily amounts of money, or its equivalent, taken in in

financial transactions, either for the benefit of the recipient or for the benefit of another.

It has already been noted that the statistics of the financial transactions of cities compiled by the Bureau of the Census are primarily statistics of governmental payments and receipts. These payments and receipts may be classified in many ways. The most important classification is one based upon the fact that some amounts of money paid or received lessen or add to the cash in the treasury, while others do not lessen or add to such cash. A classification of the payments and receipts of governments upon this basis gives rise to two classes here called real or actual, and nominal or transfer, payments and receipts.

Real or actual payments.-The real or actual payments of a nation, state, or municipality are the amounts of money, or money's worth, which its officials deliver to the public, including the governments of other civil divisions, and which lessen the total cash in its possession or control.

Real or actual receipts. The real or actual receipts of a nation, state, or municipality are the amounts of money, or money's worth, which its officials take from the public, including the governments of other civil divisions, and which add to the total cash in its possession or control.

Real or actual payments and receipts, being in all cases payments to and receipts from the public, may with propriety be called payments to and receipts from the public. The terms last mentioned are by the Bureau of the Census employed interchangeably with the terms real or actual payments and receipts.

The real or actual payments and receipts of a government, or its payments to and receipts from the public, may in turn be classified in many ways, the most significant classification being that which separates the payments and receipts for meeting the costs of government from all other actual governmental payments and receipts. Thus separated, the payments and receipts of nations, states, and municipalities are readily arranged in two groups, here called payments and receipts for meeting governmental costs, and payments and receipts other than those for meeting governmental costs.

Payments and receipts for meeting governmental costs are the net amounts of money, or other wealth expressed in terms of money, which nations, states, and municipalities pay or expend for meeting costs of government, or its expenses, interest, and outlays, and which they receive from all sources. The Bureau of the Census has in its previous reports given the name "corporate" to such payments and receipts, for lack of a more comprehensive and brief designation. It is hoped that a more descriptive designation may be suggested.

Payments of nations, states, and municipalities for meeting costs of government are readily separable

according to the objects of their payments into four classes: (1) Payments for expenses, (2) payments for interest, (3) payments for outlays, and (4) payments for the liquidation of indebtedness. These classes include the net amounts paid by governments for the objects and purposes mentioned, after amounts received to correct erroneous payments for these purposes and other counterbalancing payments have been deducted. The payments for the liquidation of indebtedness which are to be included among payments for costs of government are the net payments for this purpose, or the excess of payments for this purpose over the amounts received for debt obligations assumed or issued during a given period. The different classes of payments for meeting costs of government are frequently spoken of in this report as the net payments for expenses, interest, and outlays, and for the liquidation of indebtedness. These payments are readily separable into the same classes and given designations corresponding to those for expenses, interest, outlays, etc., of which mention has previously been made.

The receipts of nations, states, and municipalities for meeting costs of government are from two sources— revenue and public creditors. The receipts from revenue here mentioned are the net amounts obtained from revenue, as above defined, after deducting all amounts received in error and returned or to be returned in correction thereof. They are readily classified according to the specific source from which derived, and when thus classified will follow the classification of revenues already presented. Receipts from creditors, included as receipts for meeting governmental costs, are the net amounts obtained from loans and other credit transactions. They are the excess of the receipts which result from the transactions mentioned over payments for the liquidation of loans and other debt liabilities during any fiscal period.

In private business, amounts received from loans and other credit transactions are recorded by entries only in the cash account and in the liability accounts. The amounts received are generally considered as belonging to "capital," and not to "revenue." The corresponding amounts received by governments are by writers on public finance-such as Henry C. Adams, professor of political economy and finance in the University of Michigan; Richard T. Ely, professor of political economy in the University of Wisconsin; and many others recognized as being resources for meeting the costs of government, and thus to be included. in the same general class as "governmental revenue." To distinguish receipts from loans and other credit transactions from those obtained from what has here been defined as "revenue," the latter are called, by the writers mentioned, receipts from "permanent" and. "final" revenues; while those obtained from loans are designated receipts from "anticipatory" or “tem