GAO Glossary of Terms and Definitions (September 2005)


Defined differently for obligational (or budgetary) and proprietary (or financial) accounting purposes (see app. III).

Obligational (or budgetary) accounting, designed to ensure compliance with fiscal laws, is based on the concept of legal liability. A legal liability is a claim that may be legally enforced against the government. It may be created in a variety of ways, such as by signing a contract, grant, or cooperative agreement or by operation of law. (See also Obligation.

Proprietary (or financial) accounting, designed to generate data for financial statement purposes, is based on the concept of accounting liability. For federal financial accounting purposes, a liability is a probable future outflow or other sacrifice of resources as a result of past transactions or events. Generally, liabilities are thought of as amounts owed for items or services received, assets acquired, construction performed (regardless of whether invoices have been received), an amount received but not yet earned, or other expenses incurred. (See also Contingent Liability.)

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Life-Cycle Costs