Glossary of Terms

Key Terms
Term Definition
Accrual basis The basis of accounting whereby revenue is recognized when it is earned and expenses are recognized in the period incurred, regardless of when cash is received or paid.
Accrual deficit The term used in this report to refer to the net operating cost as reported in the Financial Report. (See net operating cost.)
Budget deficit The amount by which the government’s outlays exceed the sum of its receipts for a given period, usually a fiscal year. Also called "cash deficit."
Capital assets Land, structures, equipment, intellectual property (e.g., software), and information technology (including information technology service contracts) that are used by the federal government and have an estimated useful life of 2 years or more.
Capitalized Recorded as an asset on the balance sheet.

Some capital assets may not be reported on the balance sheet if they fail to meet the entity’s criteria (e.g., a dollar threshold) for balance sheet reporting.
Cash basis The basis whereby receipts are recorded when received and expenditures are recorded when paid, without regard to the accounting period in which the receipts are earned or the costs are incurred.
Cash deficit The term used in this report to refer to the budget deficit (See budget deficit.)
Contingency An existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur.
Cost The value of the resources used to produce a program, provide a service, or achieve an objective.
Depreciation The systematic and rational allocation of the acquisition cost of an asset, less its estimated salvage or residual value, over its estimated useful life.
Expense Outflow or other use of assets, or incurrence of liability, during an operating period as a result of providing goods, services, or other activities the benefits from which do not extend beyond the present operating period.
Financial commitment For federal proprietary accounting, contractual obligations that require the future use of resources.
Incur To sustain, become liable for; the term is said of a cost, expense, loss, or debt.
Legal liability In budgetary terms, an agency can incur a liability (i.e., a claim that may be legally enforced against the government) in a variety of ways, such as signing a contract, grant, or cooperative agreement, or by operation of law.
Liability For federal proprietary accounting, a probable future outflow or other sacrifice of resources as a result of past transactions or events.
Modified cash basis A term used to describe the federal government’s hybrid system for accounting for revenues from taxes and duties. Under a modified cash basis, revenue is recognized when received in cash except for tax receivables (taxes owed from taxpayers but not yet collected) and refunds payable (refunds owed to taxpayers but not yet paid by the federal government), which are both measured on an accrual basis.
Net operating cost The excess of expenses over tax revenue. (See revenue; expenses.)
Outlay The issuance of checks, disbursement of cash, or electronic transfer of funds made to liquidate a federal obligation.
Present value The worth of a future stream of returns or costs in terms of money paid immediately (or at some designated date).

A dollar available at some date in the future is worth less than a dollar available today because the latter could be invested at interest in the interim. In calculating present value, prevailing interest rates provide the basis for converting future amounts into their "money now" equivalents. The net present value is the present value of estimated future cash inflows minus the present value of cash outflows.
Receipts Collections from the public based on the government’s exercise of its sovereign powers, including individual and corporate income taxes and social insurance taxes, excise taxes, duties, court fines, compulsory licenses, and deposits of earnings by the Federal Reserve System. Total receipts are compared with total outlays in calculating the deficit or surplus.
Revenue As used in federal accounting, an inflow of resources that the government demands, earns, or receives by donation.

As used in the congressional budget process, a synonym for governmental receipts.