At year-end Oakland County had $3,000 in outstanding purchase commitments on the books.After the appropriate closing entries were made, what is the effect on the total Fund Balance of Oakland County?
A)It is $3,000 greater than it would have been if the purchase commitments had been fulfilled by year-end.
B)It is $3,000 less than it would have been if the purchase commitments had been fulfilled by year-end.
C)It is the same as it would have been if the purchase commitments had been fulfilled by year-end; it will be reduced by $3,000 next year.
D)It is the same as it would have been if the purchase commitments had been fulfilled by year-end; it will not change next year.

Question

Quizplus · Accepted Answer

The purchase commitments are recorded as an expenditure commitment, which reduces the Fund Balance. When the purchase commitments are fulfilled, the expenditure commitment is reversed and the Fund Balance is increased. Therefore, the Fund Balance is $3,000 greater than it would have been if the purchase commitments had been fulfilled by year-end.

At Year-End Oakland County Had $3,000 in Outstanding Purchase Commitments