When current E & P has a deficit and accumulated E & P is positive, the two accounts are netted at the date of the distribution. If a positive balance results, the distribution is a dividend to the extent of the balance.

Question

Quizplus · Accepted Answer

When current E&P (Earnings and Profits) has a deficit and accumulated E&P is positive, the two accounts are indeed netted at the date of the distribution. If the net result is a positive balance, the distribution is considered a dividend to the extent of this positive balance, reflecting the company's ability to pay dividends from its accumulated earnings.

When Current E & P Has a Deficit and Accumulated