When a purchase order is issued under a Capital Projects fund,how should the transaction be recorded?

Question

Quizplus · Accepted Answer

When a purchase order is issued under a Capital Projects fund, the transaction should be recorded by debiting Encumbrances and crediting Budgetary Fund Balance -- Reserve for Encumbrances. This is because the funds earmarked for a capital project are not immediately available for expenditure until the project has been completed, hence the encumbrance is established to reserve the funds for the project.

When a Purchase Order Is Issued Under a Capital Projects