In a corporate environment, these are known as liabilities. Corporations have to use accrual accounting instead of cash accounting.
In cash accounting, its real easy to calculate your balance. You just indicate revenue - expenses.
So if you spent $50,000, but made $60,000, you would indicate $10,000 of profit.
Now here's where things get complicated.
Let's say that you owe $200,000 to someone who billed you for services to your business, but you didn't have to pay the bill for another 2 years.
In cash accounting, you still had $10,000 of profit. On paper, your business is making money.
Corporations can't use cash accounting for this reason. They have to indicate what their liabilities are on their balance sheet. Somewhere on their financial statement, they would have to indicate that they owe $200,000.
How does this relate to our government?
Our government does what no business would ever be allowed to do: they put off obligations (money owed), often sell bonds to cover these expenses, and then indicate a balance that doesn't reflect this debt.
If I've lost you, you can always read this USA Today report that puts it into perspective.
The $61.6 trillion in unfunded obligations amounts to $528,000 per household. That's more than five times what Americans have borrowed for everything else — mortgages, car loans and other debt. It reflects the challenge as the number of retirees soars over the next 20 years and seniors try to collect on those spending promises.
Most people are familiar with the fact that we are currently $14 trillion in debt as a country, or that we are now running deficits of over $1 Trillion a year. In this post, I explained how the current administration is now running a deficit averaging $1.7 Trillion a year. But most people aren't aware of how much we truly are in debt.
So as you listen to congress talk about cutting $10 billion, or even $50 billion from the budget, and as you hear congressmen protecting their pet projects, remember that figure: $61.6 Trillion.
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