During the fiscal year ending June 30, 2007, the General Fund for Hart County issued purchase orders amounting to $2,000. Throughout the Fiscal year, some of the goods and services specified in those purchase orders were received amounting to $1,900 of the total ordered. Invoices for those goods and services amount to $1850. The Journal Entry to record the issuance of the purchase orders would be:

A) A debit to Expenditures Control for $1,850 and a credit to Accounts Payable for $1,850

B) A debit to Budgetary Fund Balance - Reserved for Encumbrances for $1,900 and a credit to Encumbrances Control for $1,900; a debit to Expenditures Control for $1,850 and a credit to Accounts Payable for $1,850

C) A debit to Encumbrances Control for $1,900 and a credit to Budgetary Fund Balance - Reserved for Encumbrances for $1,900; a debit to Expenditures Control for $1,850 and a credit to Accounts Payable for $1,850

D) A debit to Budgetary Fund Balance - Reserved for Encumbrances for $1,850 and a credit to Encumbrances for $1,850; a debit to Expenditures Control for $1,850 and a credit to Accounts Payable for $1,850

E) None of the above

Purchase orders and contracts will result in liabilities when the purchase orders are filled and the contracts are executed. These expected liabilities are called encumbrances. An encumbrance is merely a commitment to expend funds; no expenditure is actually incurred until the goods or services are received.

Answer rating: 100% (QA)

A debit to Budgetary Fund Balance Reser... View the full answer