What Is the Difference Between a Debt & a Deficit?

Debt and deficit are two terms that are used to describe a shortage of cash. "Debt" and "deficit" are commonly used when planning a budget.

Function

Deficit represents the amount that money that the organization is short of having a balanced budget.

Deficit Calculation

To calculate the deficit, subtract receipts, or income, from outlays, or expenses. For example, if a city has $12 million in receipts but $15 million in outlays, it would have a $3 million deficit.

Debt Calculation

Debt levels are calculated by adding the deficit for the current year to the amount of existing debt. If you have a surplus for the current year, the debt is decreased by that amount.

Significance

If there is a deficit in the budget, you must cover that deficit by borrowing money.

Types of Debt

The U.S. government borrows money to balance the budget by issuing Treasury bills, notes and savings bonds, among other debt instruments.

Fun Fact

As of February 2010, the U.S. national debt is over $12.4 trillion. For an updated count, see the Resources section for a link.

References

• U.S. Treasury: Debt vs. Deficit
• AFN: Debt? Deficit?

Resources

• U.S. Treasury: Debt to the Penny