What is a surplus in a cash-flow statement?

• A. When expenses exceed income.
• B. When income equals expenses.
• C. When total income exceeds total expenses.
• D. When there is no income.

Answer: (C)

A surplus on a cash-flow statement means total cash inflows exceed total cash outflows, resulting in a positive net cash flow for the period. This shows there was more cash coming in than going out, after accounting for operating, investing, and financing activities. For example, if cash inflows (like sales and other receipts) total $120,000 and cash outflows (expenses, purchases, etc.) total $100,000, the net cash flow is +$20,000, indicating a surplus. If expenses exceed income, you’d have a negative net cash flow (a deficit); if income equals expenses, the net cash flow is zero, not a surplus. Even with no income in one area, a surplus can still occur if other cash sources (like financing) provide more cash than the outflows. The essence is a positive net cash flow.