ACQUIRED SURPLUS Meaning and
Definition
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Acquired surplus refers to a term used in accounting and finance to describe a company's accumulated earnings and profits that have been generated over time. It represents the excess of a company's net income over its dividends or other distributions. Acquired surplus is also known by other terms such as retained earnings or retained surplus.
Acquired surplus is an important financial metric as it indicates the financial health and stability of a company. It represents the portion of a company's profits that has been reinvested into the business rather than distributed to shareholders. This surplus can be used to fund future growth initiatives, research and development, or to finance any potential future losses.
The acquired surplus is calculated by subtracting dividends or other distributions from the net income of a company. It is reported on the balance sheet under the equity section as a separate line item. The acquired surplus account increases with each profitable year and decreases when dividends or other distributions are made to shareholders.
Investors and analysts closely examine the level of acquired surplus in a company to assess its ability to withstand financial challenges and its potential for future growth. A healthy and growing acquired surplus is often a positive signal for investors, as it signifies that a company has consistently generated profits and retained a portion of them to reinvest into its operations.
Etymology of ACQUIRED SURPLUS
The etymology of the phrase "acquired surplus" can be broken down as follows:1. Acquired: The word "acquired" comes from the Latin word "acquirere" which means "to gain" or "to get". It combines the prefix "ad-" which means "to" and "quaerere" which means "to seek" or "to obtain". Over time, "acquirere" evolved into "acquiro" in Late Latin, which later became "acquire" in English.2. Surplus: The word "surplus" has its roots in Old French. It was derived from the Latin word "superplus" which means "excess" or "more than necessary". The Latin "super" means "above" or "beyond", and "plus" means "more". The word "surplus" in English was first recorded in the mid-14th century.
