Loss of supply occurs where a government in a parliamentary democracy using the Westminster System or a system derived from it is denied a supply of treasury or exchequer funds, by whichever house or houses of parliament or head of state is constitutionally entitled to grant and deny supply. A defeat on a budgetary vote is one such way by which supply can be denied. Loss of supply is interpreted as indicating a loss of confidence in the government. It is important to note that not all 'money bills' are necessarily supply bills. For instance, in Australia, supply bills are defined as 'bills which are required by the Government to carry on its day-to-day business' When a loss of supply occurs, a prime minister is generally required either by constitutional convention or by explicit constitutional instruction to:

• immediately resign (allowing the majority blocking supply to form a government) or
• seek a parliamentary dissolution (so allowing the electorate to pass judgment on the issue).

Some constitutions, however, do not allow the option of dissolution, instead requiring a resignation.

A similar deadlock can occur within a presidential system, where it is also known as a budget crisis. In contrast to parliamentary systems, the failure of the legislature to authorize spending may not in all circumstances result in an election, because some such legislatures enjoy fixed terms and so cannot be dissolved before a date of termination, which can result in a prolonged crisis.

A deadlock between a head of state and the legislative body can give rise and cause for a head of state to prematurely dismiss the elected government, requiring it to seek re-election. If a government maintains the support of a majority of legislators or the elected parliamentary representatives, the blocking of supply by a head of state would be seen as an abuse of authority and power. Many western countries have removed or restricted the right of a head of state to block supply or veto government budget unless there is overwhelming justification and cause for such action. If a government maintains the support of the elected parliament, the budget must be approved within a nominated period or else entitlement and authority for the approval of the budget is determined by a statutory majority of the parliament.