Which statement accurately defines 'debt'?

The statement that defines 'debt' correctly describes it as money that is borrowed and must be repaid with interest. Debt typically arises when an individual, corporation, or government entity borrows funds to meet immediate financial needs or to finance projects that require capital upfront. The obligation to repay includes not only the principal amount borrowed but also any interest accrued over the term of the borrowing. This relationship establishes clear expectations and contractual obligations between the lender and borrower, making it essential for financial planning and management.

In contrast, funds that are received without repayment obligations refer to grants or gifts, which do not constitute debt. Resources set aside for future projects are more accurately described as reserves or savings rather than debt, as they are not borrowed funds but rather allocated capital. Finally, funds strictly for emergency use would typically describe contingency funds, which again do not imply borrowing and repayment, key characteristics of debt.