Surplus versus Deficit

Deficit is essentially the opposite of a surplus. Understanding on how to avoid deficit and putting extra effort on gaining surplus might be somehow what every business aims to happen.

A deficit occurs when expenses exceed revenues, for example loaning to fund expansion causes deficit. Expansion otherwise was Taken in consideration of a future aims to create an enough surplus to gain financial stability. Business (or government) spent more money than it earned during the set period. 

Imports or buying exceed selling or exports, resulting in a negative balance. Importing raw materials to inflate productions; raw materials and wages resulting to increase of expenses; while selling or exporting finish products decreased due to less buyers. Law of supply and demands is a big factor to consider to be able to foresee deficit.

Liabilities exceed assets, resulting in a negative balance.  Most companies are on watch of their liabilities inventory; otherwise one will be in trouble if liabilities inflates.  Focusing on generating more assets are lucrative to increase revenue; thou both are unavoidable. Increasing revenues means increasing surplus.

Just as a surplus is not always a positive sign, especially when we are talking about revenue taxes; because the higher the revenue; the higher the taxes. Deficits are not always unintentional or the sign of a government or business that's in financial trouble.

Deficit is not necessarily bad for government spending, a deficit in a business’s budget may be cause for a budget overhaul for the next fiscal year. Spending more money than your business earns for too long can result in high debts and even business bankruptcy. 

Businesses may deliberately run budget deficits to maximize future earnings opportunities—such as retaining employees during slow months to ensure themselves of an adequate workforce in busier times; while government deliberately run budget deficits due to many projects that needs to fund with; like infrastructure and others to be able to improve the lives of its citizens. Furthermore loaning to fund those projects are the only way to achieve prosperities that would bring more revenue in the future.

On the surface, a surplus is preferable to a deficit. However, this is an overly simplistic assumption. For example, a trade deficit is not inherently bad, as it can be indicative of a strong economy. Most countries has external debt.

Deficits do carry risks if not handled properly or coupled with a large amount of debt. In the corporate world, running a deficit for too long a period can reduce the company's share value or even put it out of business.

If surplus surpasses deficit in a certain period; management must examine the future plans against the present as well as the survival of the company if surplus were dissolve in the future with no backup plan on expansion or business improvement.

Either surplus or deficit is nor good or bad; but weighing which is delicate in most areas and in present condition must be watched closely. 

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