Why encumbrances not considered expenditure under Modified Accrual?

Under the modified accrual basis of accounting, encumbrances are not considered expenditures because they represent commitments to spend funds rather than actual outflows. Encumbrances are recorded to track budgetary authority and ensure that resources are reserved for specific purposes, but they do not impact the financial position until goods or services are received and payment is made. Thus, expenditures are only recognized when liabilities are incurred, aligning with the principle of recognizing expenses when the related goods or services are delivered.