In preferences, if I set the surplus to “Spend surplus money”, what is assumed?

If ‘Spend Surplus money’ is selected, then any net income that is above the required income to meet all the clients expenses will be considered to be spent. If there is a shortfall in meeting the target expenses, it will be met from assets. 

Surplus capital is treated differently. Surplus capital from the sale of a property, receiving a windfall, or PCLS will be saved into a cash deposit.