Which of the following is NOT listed as a factor affecting change in surplus?

• A. Tax expense
• B. Net gain or loss
• C. Unrealized capital gains or losses
• D. Dividends to stockholders

Answer: (A)

Change in surplus comes from three main avenues: earnings that show up as a net gain or loss, changes in the market value of investments that produce unrealized capital gains or losses, and distributions to owners in the form of dividends to stockholders. Taxes aren’t treated as a separate driver in this breakdown because tax expense is part of the overall net gain or loss, reflecting after-tax results. In other words, taxes reduce the profitability that flows into surplus, but they’re already captured within that net figure rather than listed as an independent factor. That’s why tax expense is the item not listed.