The Earned Surplus Test Does Not Permit Capital Surplus to Be

question 4

True/False

The earned surplus test does not permit capital surplus to be used for the payment of dividends.

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Definitions:

Major Planning

Major planning involves the development of comprehensive strategies and objectives to guide an organization or project towards achieving its long-term goals.

Cost Center

A decentralized unit in which the department or division manager has responsibility for the control of costs incurred and the authority to make decisions that affect these costs.

Revenues

Increases in owner’s equity as a result of providing services or selling goods to customers.

Budget Performance Report

A report that summarizes actual costs, standard costs, and the differences for the units produced.