When are appropriations considered to be expended?

Appropriations are considered to be expended when authorized liabilities are incurred. This reflects the fundamental principle of governmental accounting, where the appropriation indicates a legal authorization for government entities to incur expenditures, which create liabilities. The moment an obligation arises from a purchase order, contract, or other commitments that lead to a future payment is when the appropriation is deemed to be spent.

This understanding is essential in governmental budgeting and financial reporting because it ensures that spending aligns with the established appropriations, reflecting the actual fiscal responsibility of the government. The timing of incurring liabilities confirms the government's intention to utilize available resources within the budget parameters set for the fiscal period, which helps maintain financial control and accountability.

In contrast, simply receiving cash does not equate to the expenditure of appropriations because it does not involve the recognition of a liability. Approval of a budget indicates planned spending but does not trigger the "expenditure" status of appropriations. Additionally, a budget exceeding revenues is a different concept altogether related to financial forecasting and not about when appropriations get spent. Thus, the direct relationship between incurred liabilities and appropriations allows for proper accounting of governmental expenditures.