Annual surplus

The annual surplus is the difference between income and expenses from the income statement in one accounting period. This profit can either be distributed to the shareholders or accumulated.

Definition / explanation

In commercial law, the annual surplus describes the profit and loss account of a company in one accounting period, usually at the end of a financial year. The expenses are compared with the income. Previous periods, hires and withdrawals are not taken into account.

A positive difference results in the annual surplus, a negative one the annual deficit. Corporations either distribute the profit to the shareholders or accumulate them, partnerships tax the profit individually.

Calculation of the annual surplus

First there is a summary of all ordinary and extraordinary income and expense items in a sum calculation with interim results. These can include operating and financial results, extraordinary expenses and income as well as the effects of taxes on income and earnings. This last item, company taxes, is followed by the annual surplus as the final total item.


+/- Inventory of finished and unfinished products
+ other capitalized own work
+ other operating income
- Material costs (total of raw materials, consumables and supplies, total of services received)
- Personnel expenses (sum of wages, salaries, sum of social contributions and expenses)
- Depreciation
- Other operating expenses
= Operating profit
+ Investment income
+ Income from loans and other securities held as financial assets
+ similar income and other interest
- Depreciation on securities and financial assets of the current assets
- Interest and similar expenses
= Result of ordinary business activity
+ extraordinary income
- Extraordinary expenses
= extraordinary result
- Income taxes
- other taxes
= Annual surplus / annual deficit

The result for the annual surplus or the annual deficit is a balance sheet item in equity. An annual surplus increases equity, an annual deficit reduces equity.

Use of the annual surplus

  • Accumulation - The annual surplus will be retained
  • distribution - The surplus is distributed to the shareholders. In the case of stock corporations, part of the annual surplus must be used for reserves

Key figures of the annual profit

Da der Jahresüberschuss zu den Hauptzielen der Accounting policy gehört und Bestandteil von betriebswirtschaftlichen Kennzahlen ist, kann das Ergebnis unter anderem durch den Verkauf von Vermögensgegenständen oder durch das Auflösen von hidden reserves be improved.

The cash flow profitability (cash flow profitability = (annual profit + depreciation) / total capital) makes statements about the amount of revenue-related revenue surpluses on the total capital employed. To what extent the use of the equity has paid off is calculated as follows:

Return on equity = annual surplus / equity

Accrual of the annual surplus

If a subsidiary transfers the annual surplus to the parent company or if the parent company compensates for the annual deficit, the profit or loss is not identical to the annual surplus or deficit. The balance sheet profit is zero.

In reality, the profits and losses of the subsidiaries have been exhausted by the parent company and are shown under the items “Income from loss absorption” or “Expenses from transferred profits” and thus constitute the adjustment item.


  • Annual surplus is the difference between income and expenses
  • if the difference is negative, there is an annual deficit
  • the result increases or decreases equity
  • the annual surplus is either retained or distributed
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