The Accounting Review Vol. 12 No. 4 1937
ACCOUNTING FOR STOCK DIVIDENDS PAID.
Abstract
This article focuses on the accounting for stock dividends paid. It says that legal reasoning in relation to stock dividends is drawn in part from heir known effects and implications in business practice. These considerations constitute the central subject-matter of the present study. The plan is, first, to examine the subject from the standpoint of fundamental principles, and second, to use the principles as the basis for a rational theory of stock dividends. The present article deals with the payment of stock dividends, a subsequent article will be concerned with the receipt of stock dividends. Cash dividends paid must be well under annual earnings, thereby permitting accumulation of profits in the business. In a growing business, partial retention of earnings is generally forced upon the company. This is because expansion creates need for additional funds and earnings provide a readily available source of such funds. Moreover, partial retention of earnings is a necessary accompaniment to the introduction of senior capital under a system of conservative financing.
- DOI
- 10.2308/tar-7083623
- Volume
- 12
- Issue
- 4
- Pages
- 369-385
- Language
- en
- Sources
- openalex crossref