To calculate a budget deficit, you need to compare the total amount of revenue received by the entity during a given period (usually a year) to the total amount of spending or expenditures made by the entity during the same period.
The formula to calculate a budget deficit is as follows:
Budget Deficit = Total Expenditures – Total Revenues
If the total expenditures exceed the total revenues, then the result will be a budget deficit. On the other hand, if the total revenues exceed the total expenditures, then the result will be a budget surplus.
For example, let’s say a government collected $500 billion in tax revenue and spent $600 billion on various programs and projects in a fiscal year. The budget deficit for that year would be calculated as follows:
Budget Deficit = $600 billion (Total Expenditures) – $500 billion (Total Revenues) Budget Deficit = $100 billion
In this case, the government would have a budget deficit of $100 billion.