Assume encumbrances do not expire at year-end. $16,000 was encumbered during the prior year for a computer and the actual cost of the computer in the current year is $14,000. How does this affect unassigned fund balance?

Question

Quizplus · Accepted Answer

During year 1, Encumbrance Control would be debited for $16,000 and Budgetary Fund Balance-Reserve for Encumbrances would be credited for $16,000. During Year 2, Budgetary Fund Balance-Reserve for Encumbrances would be debited and Encumbrance Control would be credited for $16,000. Expenditure Control would be debited and a liability account would be credited for $14,000. The effect would be a decrease in fund balance in year 1 of 16,000 and a net increase of $2,000 in year 2.

Assume Encumbrances Do Not Expire at Year-End