What is the difference between an encumbrance and an actual?
“Encumbrances” are contractual obligations entered into legally when purchase orders are issued. Encumbrances reserve budgeted funds to demonstrate that funds will be available to cover the obligation. Thus, they represent an obligation to pay for goods or services that have been ordered but not yet received. “Actuals” are actual expenditures, such as payments and journal entries. They are called actual because the business transaction has already occurred. The goods or services have been received or paid.
