Surplus is acquired for the most part by the setting aside of profits for very unusual contingencies. Assume the bank earned $20,000 during the six months ending June 30, and that the stockholders decided that $5,000 of that should go to the surplus account. The general ledger entries would be:

Undivided Profits (27)

The undivided profits account was explained and illustrated in detail in a previous chapter and reference is made thereto in this connection. Losses on account of bad loans, bad checks, and the like are usually put through the undivided profits account.