When discussion the current state of personal or corporate finances and assets, the phrase “in the black” is often used to refer to a state that is considered to be positive. Essentially to be in the black is to mean that the individual, corporation, or non-profit organization currently has more assets than liabilities. Here are some examples of factors that go into determining if the current financial status is in the black, or if circumstances dictate actions that will help to lead to that condition.

In many instances, the name of the game is to always seek to be in the black. When current liabilities exceed the assets on hand, the status is considered to be in the red. This dates back to the old accounting process of recording credits in black ink, while debits were recorded in red ink. At the end of the day, the balance sheet was expected to show a final tally that was written in black ink, indicating the presence of a profit, or at least a state of breaking even.

When there is the presence of a steady source of revenue or income and the entity is not in debt, the state of operating in the black is relatively easy to reach and maintain. Unfortunately, just about every home and business budget carries some degree of debt. Fortunately, there are ways to control the situation. Making a profit, growing additional revenue sources, and keeping the level of indebtedness within reasonable limits are all basic tools in helping to keep the budget operating in the black.

For persons and businesses that find themselves not operating in the black, immediate actions must be taken in order to reverse the situation and restore profitability to the budget. This will often involve cutting expenses, which helps to free up funds that can be applied to existing debt, as well as limiting the creation of new debt. Often, the measures required to restore a status of being in the black calls for sacrifices, but these are often temporary. Once the budget is balanced once again and the home or business is back in the black, it is possible to loosen restrictions on spending slightly. But care should be taken to avoid future financial periods where revenue does not exceed expenses, or the status of being in the black will prove to be short lived.