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 the Encumbrances Control and crediting the Budgetary Fund Balance - Reserve for Encumbrances. This is because the purchase order is not a recorded expenditure until the goods or services are received and the actual expenditure is incurred. Until then, the encumbrance represents a commitment to expend funds to fulfill the purchase order. Once the goods or services are received, the encumbrance is reversed, and the actual expenditure is recorded by debiting Expenditures and crediting Vouchers Payable.

When a Purchase Order Is Issued Under a Capital Projects