Legal Definitions - initial surplus

Initial surplus is the surplus that appears on a financial statement at the beginning of an accounting period. It does not reflect the operations for the statement's period.

• If a company has $10,000 in surplus at the end of the year and $2,000 in initial surplus at the beginning of the year, the total surplus for the year is $12,000.
• When a new business starts, it may have initial surplus from the investments made by the owners or investors.

The examples illustrate that initial surplus is the surplus that exists before any operations or transactions take place during a specific period. It is important to differentiate initial surplus from the surplus gained from the operations of the business during the period.