At the time of a purchase order being issued, it is necessary to debit the Encumbrances control account and credit the Reserve For Encumbrances account.

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When a purchase order is issued, it represents a commitment or reservation of funds for the future payment of goods or services. As such, an encumbrance is created and the Encumbrances control account is debited to reflect this. However, the funds related to the encumbrance have not yet been spent, so they are set aside by crediting the Reserve For Encumbrances account. This ensures that the remaining balance in the appropriation account is accurate as it reflects the amount of funds that are actually available for expenditure.

At the Time of a Purchase Order Being Issued, It