Journal Article The Early Use of "Capital" Get access Henry Rand Hatfield Henry Rand Hatfield University of California Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 49, Issue 1, November 1934, Pages 162–163, https://doi.org/10.2307/1883882 Published: 01 November 1934

The article focuses on operating deficit and paid-in surplus. There are two distinct but closely allied problems in connection with the relation of operating deficits and dividends. The first is whether dividends may be paid from subsequent profits despite the existence on the books of an operating deficit. This question has been answered in both ways by statutory provisions and by accountants. If the answer is in favor of allowing dividends despite a previous operating deficit, the second question is immaterial. But if it is held that dividends may not be paid out of subsequent earnings in face of an existing operating deficit shown on the books, there still remains the second question. In estimating the net profits available for dividends, must the deficits of a past year be carried over to the profit and loss account of the following year or may a past operating deficit be removed through charging it against paid-in surplus, so that the deficit has no effect on the showing of profits available for dividends in subsequent years.