The accounting department for Sea City Maryland maintains an appropriations ledger for its Beautification Department--supplies. The ledger shows that the amount appropriated for supplies $85,000. The ledger also shows that three purchase orders were placed, PO A for $15,000, PO B for $21,000, and PO C for $27,000. The flowers ordered on PO A arrived along with an invoice of $15,000. The soil and other supplies ordered on PO B arrived, were inspected, and a voucher was approved and paid in the amount of $24,000. The trees ordered on PO C had not yet arrived.
According to the appropriations ledger, how much of the appropriation was available for spending?

Question

Quizplus · Accepted Answer

When a government gives formal accounting recognition to the cost of a purchase order, it records encumbrances equal to the purchase order amount. This reduces the net available appropriation by $63,000 ($15,000 + $21,000 + $27,000). However, the supplies ordered on PO B resulted in an actual expenditure of $3,000 more than the purchase order price, leaving an available appropriation balance of $19,000.

The Accounting Department for Sea City Maryland Maintains an Appropriations