Tougher controls on costs, lower spending on humanitarian disasters and an increase in income has helped bolster Oxfam's finances.

The charity had taken the unusual step of dipping into its reserves in its 2012-3 financial year after being overwhelmed by the number of humanitarian disasters. But according to its annual report published on Wednesday, the charity has now reversed that position after cutting 125 jobs as well as spending on humanitarian work and benefiting from an increase in donations.

"2012-3 was a tough year for Oxfam's finances. In 2013-4 we've done much better. The overall effect of some fundraising successes, better trading and intensive cost control has meant that we have ended 2013-14 in a stronger position than we started it," said Mark Goldring, who became chief executive in May 2013 after joining from Mencap.

In the 12 months to March 2014, Oxfam produced a £24m surplus – the difference between its expenditure and its income. During the previous year it spent nearly £17m more than it received.

Income rose to £389m, up £21m, reversing the fall the previous year with Oxfam's shop network reporting a rise in income after a fall the previous 12 months.

There was a growth in income from partnerships with Sainsbury's and the "shwopping" project with Marks & Spencer to reduce the amount of unwanted clothing going to landfill.

Spending on charitable activities fell from £290m to £269m largely because of a fall in expenditure on humanitarian disaster from £126m to £104m.

Goldring said: "That's a great tribute to everyone who's been involved in raising the money. It also reflects some of the tough cost-cutting measures we've had to take during the year, including job cuts our headquarters in Oxford.

"It will make us a more effective organisation and allow us to spend more in our countries of work, but's very hard for the individuals involved."

His predecessor Dame Barbara Stocking left last year after 12 years in the role and received £108,775 as a result of benefits accrued through pension schemes.

Goldring – who was paid £121,294 last year, with a pension contribution of £12,170 – was among three employees to receive more than £120,000. The two others were overseas – a manager living in a country with a high tax rate and another who received pay in lieu of pension.

There was a 10% fall in the amount it received from the UK government to £34m.

Oxfam was involved helping in the aftermath of typhoon Haiyan in the Philippines and also worked in Syria where millions have been displaced by the civil war. The charity operates in 53 countries and employs about 5,300 people globally. It also has the support of 22,000 volunteers.

A spokesman for Oxfam said the charity had to spend some of its reserves in the previous financial year "in response to the challenging fundraising environment that we found ourselves in and the unprecedented number of humanitarian disasters to which we responded, we had to spend some of our reserves.

"This year we have been able to replenish those reserves back to their target level. We keep the minimum reserves necessary to protect our programme work from risk of disruption at short notice due to lack of funds. It is equivalent to approximately two months' unrestricted expenditure."

Goldring has previously defended Oxfam's support for food banks in the UK, run with the Trussell Trust, and he has faced criticism for an advertising campaign focusing on austerity Britain which, it says, has created a "perfect storm" of zero-hour contracts, high prices and benefit cuts.

"We will continue to look at more cost effective ways of working and have already started to simplify and consolidate the way we operate programmes in countries and regions around the world," said Karen Brown, chair of Oxfam.