The accounting department for Sing Sing Prison in Ossining maintains an appropriations ledger for Corrections Department--supplies. The ledger shows that the amount appropriated for supplies is $78,000. The ledger also shows that three purchase orders were placed, PO A for $25,000, PO B for $32,000, and PO C for $15,000. The supplies ordered on PO A arrived were awaiting inspection. The supplies ordered on PO B arrived, were inspected, and a voucher was approved and paid in the amount of $34,000. The supplies 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 $72,000 ($25,000 + $32,000 + $15,000). However, the supplies ordered on PO B resulted in an actual expenditure of $2,000 more than the purchase order price, leaving an available appropriation balance of $4,000.

The Accounting Department for Sing Sing Prison in Ossining Maintains