What defines a balanced budget?

A balanced budget is defined as a situation in which total revenues equal total expenditures. This means that all income that a budget receives is used to cover expenses, without any shortfall or surplus. This concept is important in financial and governmental contexts because it indicates fiscal responsibility and stability, ensuring that spending does not outpace income and avoiding debt accumulation.

Maintaining a balanced budget is crucial for long-term financial health, as it promotes sustainable economic management. This practice ensures that organizations or governments can meet their financial obligations without reliance on borrowing or depleting reserves.