Encumbrances are not the same as accrued expenses. Encumbrances can represent a number of things, but are most commonly used to represent an outstanding obligation or commitment. These figures can be used for planning and or budgeting purposes, but they do not represent actual expenditures.
For example, when a service contract is agreed upon procurement services will set up a purchase order in the system, the total dollar amount of the service contract will then show up as an encumbrance even though no services has been provided or paid for yet. As services are received and payments made, the encumbrance is reduced. Encumbrance amounts also represent the open balance amounts of an order. For more information please visit the encumbrance website, http://f2.washington.edu/fm/gca/encumbrances-0.
An accrued expense occurs when an item or service has been received within a certain period, but the payment for it did not post or was not recognized in that same period.
Encumbrance figures should not be included in the financial reports unless it is known that the encumbrance amount meets the accrued expense definition.