Budget Deficit

Posted in Finance, Accounting and Economics Terms, Total Reads: 1688

Definition: Budget Deficit

Budget Deficit is simply the difference between an entity’s income and expenditure when the latter exceeds the former.

In equation form, it is


Budget Deficit= Expenditure- Income

It is usually in reference to a particular period of time say a month, 6 months or a year. The entity can be an individual, a corporation or the government. When reference is to the government, it is called the federal budget deficit or the national debt. The federal deficit should be as low as possible for a healthy government and this can be done by reducing spending and increasing the sources of income such as taxation.

The case when income is equal to expenditure is the condition when budget deficit is zero and hence is called as zero budget deficits.

When the income exceeds the expenditure, it is called the budget surplus.

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