Abstract A more complete survey of legal opinion on the subject of corporate dividends indicates that while certain judges may be incompletely trained in the theory of accounts, there are few instances in which a clearly presented problem, upon the solution of which accountants themselves could agree, would be decided in a way which would violate the accounting principles involved in the case. Many of the apparently meaningless and erroneous statements are merely dicta, and much of the difficulty is due to a misuse of accounting terms rather than a confusion of ideas. Nevertheless, in order to avoid ambiguity and misunderstanding, it must be clearly understood that the terms "profit" and "surplus" do not refer to a fund of available cash waiting to be spent, that there is no relationship between profits or surplus and any particular asset so that an overdraft at the bank and the existence of a large surplus are not incompatible, that profits are usually "invested" before they are even determined, that surplus cannot be reduced by paying debts or purchasing assets, or, in other words, that profits and surplus are merely terms which refer to the excess of assets in general over the sum of the formal capital stock and the liabilities to outside creditors.