Modified accrual accounting records encumbrances when goods are ordered and accrual accounting only records a liability only when goods are received.

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In modified accrual accounting, encumbrances are recorded when goods are ordered as a way of reserving funds to cover the expected liability, while in accrual accounting, the liability is only recorded when the goods are received and an invoice is issued.

Modified Accrual Accounting Records Encumbrances When Goods Are Ordered and Accrual