The City of Lakeview adopts its budget on a basis of accounting that permits outstanding purchase commitments to be charged against the budget in the year that the goods are ordered instead of in the year they are received. During 2018, the city received $4,000 of supplies (of which $3,000 had been ordered in 2018 and $1,000 was ordered in 2017) and had $500 of outstanding purchase commitments for supplies at year-end. In the budget-to-actual comparison, the expenditures for supplies would be:
A) $3,000.
B) $3,500.
C) $4,000.
D) $4,500.

Question

Quizplus · Accepted Answer

The expenditures for supplies would be $3,500, which includes the $3,000 of supplies ordered and received in 2018 plus the $500 of outstanding purchase commitments at year-end. The $1,000 of supplies ordered in 2017 and received in 2018 would have been charged against the 2017 budget, not 2018.

The City of Lakeview Adopts Its Budget on a Basis