Define surplus in financial terms.

Surplus, in financial terms, refers to a situation where income exceeds expenditures. This indicates that an individual, organization, or government is generating more revenue than it is spending within a certain timeframe. This surplus can be utilized for various purposes, such as saving, investing, paying off debt, or funding future projects.

When surplus occurs, it reflects a healthy financial condition because it demonstrates effective financial management and the ability to generate funds beyond what is necessary for immediate costs. This is particularly important for budgeting and long-term financial planning, as having a surplus allows for greater financial flexibility and the potential for growth or increased savings.

The concept of surplus is critical for understanding financial stability and sustainability, as it contrasts with scenarios where expenditures exceed income, which can lead to deficits and financial difficulties.