The transportation fleet department for a provincial government uses an encumbrance system.On October 15,20X1,the department manager issues a purchase order for $4,000 for snow tires.The tires were delivered on October 31,20X1,with an invoice for $3,800.What should be recorded on October 15,20X1?

Question

Quizplus · Accepted Answer

An encumbrance system records anticipated expenditures, such as the purchase of snow tires. Therefore, when the department manager issues a purchase order for $4,000 on October 15,20X1, an encumbrance for $4,000 should be recorded. This indicates that funds have been set aside for the anticipated expenditure. When the invoice is received on October 31,20X1, an accounts payable for the actual amount of $3,800 would be recorded, reducing the encumbrance by the same amount. Therefore, the correct choice is D.

The Transportation Fleet Department for a Provincial Government Uses an Encumbrance