October. 1949 No. 39
Recommendation of Subcommittee on Terminology
Discontinuance of the Use of the Term "Surplus"
The committee on accounting procedure has approved as an objective the recommendation of the subcommit-tee on terminology made herein with respect to the dis-continuance of the use of the term "surplus" in account-ing, and has authorized its publication. The statements herein contained, however, are not to be regarded as pronouncements of the committee on accounting procedure.
RECOMMENDATION OF SUBCOMMITTEE ON TERMINOLOGY
In a report of the committee on terminology, issued in September, 1941, as Research Bulletin No. 12 (Special), it was recommended that consideration be given to the feasibility of a general discontinuance of the use of the word surplus in accounting. Since that time there has been extensive discussion of the proposal, and some companies have used other terms in their financial statements. The present sub-committee on terminology of the committee on accounting procedure has considered the matter and its conclusions are set forth herein.
A factor of primary importance in the balance-sheet presentation of the stockholders' equity is the status of ownership at the balance-sheet date. Where two or more classes of stockholders are involved, the interests of each must be presented as clearly as possible. These interests include the entire proprietary capital of the enterprise, which is conventionally divided further, largely on the basis of source, as follows:
1. Capital stock, representing the par or stated value of the shares.1
1 In some states the term "capital stock" has been replaced by the term "stated capi-tal" which represents the par or stated value of shares, or the consideration received upon the issuance of shares.
Issued by the Committee on Accounting Procedure, American Institute of Accountants, 270 Madison Avenue, New York 16, N. Y.
Copyright 1949 by American Institute of Accountants