What is the crucial factor in determining whether an expenditure is recognized under modified accrual accounting?

Under modified accrual accounting, the recognition of expenditures is primarily based on the occurrence of related transactions or events rather than the timing of cash flows. The crucial factor is whether the goods and services have been provided. This basis ensures that expenses are recognized in the period when the liability for the payment is incurred, reflecting the consumption of resources.

When goods and services are received, it indicates that an obligation has been established, thus allowing the government entity to record the expenditure. This is fundamental to the accountability principle in governmental accounting, which emphasizes matching expenses with the period in which they relate to the operations of government.

The other aspects mentioned, such as whether the invoice has been paid or whether the budget has been approved, do not directly affect the timing of expenditure recognition within this framework. Payment of invoices may occur later and does not influence the recognition of the expenditure, and while having an approved budget is important for planning and control, it does not itself dictate when expenditures are recognized under modified accrual accounting. Future cash flows are relevant for financial analysis but do not determine the recognition of expenditures in this accounting method.