In a Capital Projects Fund, when a contract is signed with a contractor to construct a fixed asset, the amount of the contract is:

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When a contract is signed with a contractor to construct a fixed asset in a Capital Projects Fund, the amount of the contract is debited to Encumbrances as it represents the amount of budgetary resources committed but not yet spent. Once the work is completed, the Encumbrances are reversed and Expenditures are debited. Contracts Payable and Other Financing Sources are not affected at this point.

In a Capital Projects Fund, When a Contract Is Signed