Legal reservation of funds based on the amount of orders placed, contracts awarded, services received, and similar transactions during an accounting period that will require payment during the same or future periods is called?

• A. Obligations
• B. Commitments
• C. Pecuniary certification
• D. Budget Authority

Answer: (A)

When funds are legally set aside because of concrete transactions—orders placed, contracts awarded, services received—a binding liability is created to pay for those items. That binding promise to disburse money in the future is what defines an obligation. It marks a legal commitment to outlay funds, stemming from the actual transactions that have occurred or will occur within the accounting period. Commitments, by contrast, are reservations made before a legal liability exists; pecuniary certification is the process of confirming funds are available for obligations; and budget authority is the overall permission to incur obligations and make outlays, not the specific liability itself.