Under the modified accrual basis, which statement about expenditures is correct?

• A. Expenditures Recognized When Paid
• B. Expenditures Recognized When Incurred
• C. Expenditures Recognized When Cash Is Disbursed
• D. Expenditures Recognized When Goods Are Delivered

Answer: (B)

Under the modified accrual basis, expenditures are recognized when the related liability is incurred, not when cash is paid or disbursed. This means the government records the expense in the period when it receives goods or services and an obligation to pay exists, using current financial resources. Payment of cash later does not create a new expenditure in the period of cash disbursement; the liability and the corresponding expenditure were already recognized when incurred. Goods delivery alone isn’t the trigger unless it creates a present obligation and measurable amount; the key is the point at which the government incurs the obligation.