Vanderbilt Law Review

First Page



The examination of the net worth section of a balance sheet reveals two major parts, namely, (1) the capital stock account and (2) the surplus account. The surplus account is the balancing account which equalizes the difference between the assets, liabilities and capitalization. In this manner the surplus account becomes a reservoir into which are poured increases in net worth and out of which are dipped decreases. Although every transaction of a business either directly or indirectly bears upon the surplus account, corporate accountants and directors have not given enough attention to the proper treatment and handling of this important account.